BERWYN, Pa.--(BUSINESS WIRE)--
Trinseo
(NYSE: TSE), a global materials company and manufacturer of plastics,
latex binders and synthetic rubber, today announced that its fourth
quarter 2018 results are expected to be below the low end of previously
issued guidance due to several factors that occurred primarily late in
the fourth quarter. Fourth quarter 2018 net income (loss) is estimated
to be between $(3) million and $1 million and Adjusted EBITDA is
estimated to be between $63 million and $67 million.
Rapidly declining feedstocks prices, particularly in the latter half of
the fourth quarter, are expected to result in an unfavorable pre-tax net
timing impact of approximately $28 million, primarily in Feedstocks and
Polystyrene. Previously issued guidance for the fourth quarter of 2018
assumed no net timing impacts. Large net timing impacts can occur in
quarters that experience significant movements in raw material prices,
particularly styrene, benzene, and butadiene. Over longer periods of
time, the effect of these timing impacts tend to offset as raw material
prices move up and down.
Fourth quarter operating results are also expected to be negatively
impacted by inventory destocking from customers and delayed orders
caused by macroeconomic dynamics in China and falling feedstock prices,
as well as continued weakness in the automotive and tire markets. The
severity of these weak market conditions in November and December was
greater than previously expected.
In addition, an unplanned outage at the Company’s styrene plant in
Terneuzen, the Netherlands occurred in December, and is expected to
negatively impact results by approximately $7 million in the fourth
quarter. The plant restarted successfully in early January.
Also, the Company announced a reduction in force in its Synthetic Rubber
segment during the fourth quarter. This action is anticipated to result
in cost savings of approximately $2 million in 2019 and $3 million
annually thereafter. The Company expects to incur a pre-tax charge of
approximately $5 million in the fourth quarter related to this action,
which will be treated as an add back in the calculation of Adjusted
EBITDA.
“We remain committed to providing innovative technologies and solutions
to serve the performance tire market, but this restructuring action is a
necessary step to more closely align the cost structure of Synthetic
Rubber with the current tire market environment,” said Chris Pappas,
Trinseo’s President and Chief Executive Officer.
Fourth quarter cash from operations and capital expenditures are
estimated to be approximately $128 million and $31 million,
respectively, resulting in Free Cash Flow of approximately $98 million.
For the full year, cash from operations and capital expenditures are
estimated to be approximately $367 million and $121 million,
respectively, bringing full year 2018 Free Cash Flow to approximately
$245 million. The Company repurchased approximately 950,000 shares in
the fourth quarter for $47 million. In 2018, Trinseo repurchased
approximately 2.2 million shares, about 5% of shares outstanding, for
$143 million.
“Despite challenging economic conditions in the last third of 2018,
Trinseo continues to be strongly cash generative and committed to
returning cash to shareholders,” said Pappas. “We returned approximately
$209 million in 2018 to our shareholders via share repurchases and
dividends.”
For a reconciliation of estimated fourth quarter and full year
(unaudited) net income to Adjusted EBITDA and cash provided by operating
activities to Free Cash Flow, see Notes 1 and 2 below, respectively.
Trinseo will host a conference call to discuss its Fourth Quarter and
full year 2018 financial results on Thursday, February 14 at 10 AM
Eastern Time.
Commenting on results will be Chris Pappas, President and Chief
Executive Officer, Barry Niziolek, Executive Vice President and Chief
Financial Officer, and David Stasse, Vice President, Treasury and
Investor Relations. The conference call will include brief introductory
comments followed by a question and answer session available by phone at:
Participant Toll Free Dial-In Number: (866) 393-4306
Participant
International Dial-In Number: +1 (734) 385-2616
Conference ID
2538367
The Company will also offer a live Webcast of the conference call with a
question and answer session via the registration
page of the Trinseo Investor Relations website.
Trinseo will distribute its Fourth Quarter 2018 financial results via
press release on Business Wire and post the release, prepared remarks
and presentation slides on the Company’s Investor Relations website on
Wednesday, February 13, 2019 after the market close. The Company will
furnish copies of the financial results press release and presentation
slides to investors by means of a Form 8-K filing with the U.S.
Securities and Exchange Commission.
A replay of the conference call and transcript will be archived on the Company’s
Investor Relations website shortly following the conference call.
The replay will be available until February 14, 2020.
Unaudited financial data for the fiscal quarter and year ended December
31, 2018 presented herein are preliminary, based upon our good faith
estimates and subject to completion of our financial closing procedures.
We have provided ranges for certain of our expectations described herein
because our fiscal quarter and year-end closing procedures are not yet
complete. While we expect that our final financial results for the
quarterly and annual periods ended December 31, 2018, following the
completion of our financial closing procedures, will be within the
ranges described herein, our actual results may differ materially from
these estimates as a result of the completion of our financial closing
procedures as well as final adjustments and other developments that may
arise between now and the time that our financial results for these
quarterly and annual periods are finalized. All of the data presented
herein has been prepared by and is the responsibility of management.
This summary is not a comprehensive statement of our financial results
for the quarterly and annual periods.
Note 1: Reconciliation of Non-GAAP Performance
Measures to Net income
We present Adjusted EBITDA as a non-GAAP financial performance measure,
which we define as income from continuing operations before interest
expense, net; income tax provision; depreciation and amortization
expense; loss on extinguishment of long-term debt; asset impairment
charges; gains or losses on the dispositions of businesses and assets;
restructuring; acquisition related costs and other items. In doing so,
we are providing management, investors, and credit rating agencies with
an indicator of our ongoing performance and business trends, removing
the impact of transactions and events that we would not consider a part
of our core operations.
We also present Adjusted Net Income and Adjusted EPS as additional
performance measures. Adjusted Net Income is calculated as Adjusted
EBITDA (defined beginning with net income, above), less interest
expense, less the provision for income taxes and depreciation and
amortization, tax affected for various discrete items, as appropriate.
Adjusted EPS is calculated as Adjusted Net Income per weighted average
diluted shares outstanding for a given period. We believe that Adjusted
Net Income and Adjusted EPS provide transparent and useful information
to management, investors, analysts and other stakeholders in evaluating
and assessing our operating results from period-to-period after removing
the impact of certain transactions and activities that affect
comparability and that are not considered part of our core operations.
There are limitations to using the financial performance measures noted
above. These performance measures are not intended to represent net
income or other measures of financial performance. As such, they should
not be used as alternatives to net income as indicators of operating
performance. Other companies in our industry may define these
performance measures differently than we do. As a result, it may be
difficult to use these or similarly-named financial measures that other
companies may use, to compare the performance of those companies to our
performance. We compensate for these limitations by providing
reconciliations of these performance measures to our net income, which
is determined in accordance with GAAP.
For the reasons discussed above, we are providing the following
reconciliations of expected net income to Adjusted EBITDA, Adjusted Net
Income, and Adjusted EPS for the three months ended December 31, 2018,
and for the full year ended December 31, 2018. See “Note on
Forward-Looking Statements” below for a discussion of the limitations of
these estimates. Amounts below may not sum due to rounding.
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(Unaudited)
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Three Months Ended
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Year Ended
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(In millions, except per share data)
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December 31,
2018
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December 31,
2018
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Adjusted EBITDA
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$
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63 - 67
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$
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571 – 575
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Interest expense, net
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(11
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)
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(46
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)
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Provision for income taxes
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(7) - (8
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)
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(72) - (73
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)
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Depreciation and amortization
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(34
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)
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(130
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)
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Reconciling items to Adjusted EBITDA (a)
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(14
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)
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(32
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)
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Net Income (loss)
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(3) – 1
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291 - 294
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Reconciling items to Adjusted Net Income (a)
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11
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25
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Adjusted Net Income
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9 - 12
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315 - 319
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Weighted average shares- diluted (b)
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43.3
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43.7
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EPS (Diluted)
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$
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(0.06) – 0.02
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$
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6.65 - 6.72
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Adjusted EPS
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$
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0.20 - 0.27
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$
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7.21 - 7.29
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(a)
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Reconciling items to Adjusted EBITDA and Adjusted Net Income for the
three months and year ended December 31, 2018 reflect the Company’s
preliminary estimate of adjustments for the periods, and primarily
reflect advisory and professional fees incurred in conjunction with
the Company’s initiative to transition business services from The
Dow Chemical Company, as well as certain restructuring charges
during the periods.
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(b)
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Weighted average share information presented above is unaudited and
remains preliminary, based upon our good faith estimates and subject
to completion of our financial statement close procedures, as
discussed above.
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Note 2: Reconciliation of Non-GAAP Liquidity
Measures to Cash from Operations
The Company uses Free Cash Flow to evaluate and discuss its liquidity
position and results. Free Cash Flow is defined as cash from operating
activities, less capital expenditures. We believe that Free Cash Flow
provides an important indicator of the Company’s ongoing ability to
generate cash through core operations, as it excludes the cash impacts
of various financing transactions as well as cash flows from business
combinations that are not considered organic in nature. We also believe
that Free Cash Flow provides management and investors with a useful
analytical indicator of our ability to service our indebtedness, pay
dividends (when declared), and meet our ongoing cash obligations.
Free Cash Flow is not intended to represent cash flows from operations
as defined by GAAP, and therefore, should not be used as an alternative
for that measure. Other companies in our industry may define Free Cash
Flow differently than we do. As a result, it may be difficult to use
this or similarly-named financial measures that other companies may use,
to compare the liquidity and cash generation of those companies to our
own.
For the reasons discussed above, we are providing the following
reconciliation of expected cash provided by operating activities to Free
Cash Flow for the three months ended December 31, 2018, and for the full
year ended December 31, 2018. See “Note on Forward-Looking Statements”
below for a discussion of the limitations of these estimates. Amounts
below may not sum due to rounding.
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(Unaudited)
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Three Months
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Year
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Ended
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Ended
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December 31,
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December 31,
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(In millions)
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2018
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2018
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Cash provided by operating activities
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$
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128
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$
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367
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Capital expenditures
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(31
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)
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(121
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)
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Free Cash Flow
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98
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245
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About Trinseo
Trinseo (NYSE:TSE) is a global materials solutions provider and
manufacturer of plastics, latex binders, and synthetic rubber. We are
focused on delivering innovative and sustainable solutions to help our
customers create products that touch lives every day — products that are
intrinsic to how we live our lives — across a wide range of end-markets,
including automotive, consumer electronics, appliances, medical devices,
lighting, electrical, carpet, paper and board, building and
construction, and tires. Trinseo had approximately $4.4 billion in net
sales in 2017, with 16 manufacturing sites around the world, and
approximately 2,200 employees. For more information visit www.trinseo.com.
Use of non-GAAP measures
In addition to using standard measures of performance and liquidity
that are recognized in accordance with accounting principles generally
accepted in the United States of America (“GAAP”), we use additional
measures of income excluding certain GAAP items (“non-GAAP measures”),
such as Adjusted Net Income, Adjusted EBITDA
and
Adjusted
EPS and
measures of liquidity excluding certain GAAP items, such
as
Free Cash Flow. We believe these measures are useful for
investors and management in evaluating business trends and performance
each period.
These
income
measures are also used to
manage our business and assess current period profitability, as well as
to provide an appropriate basis to evaluate the effectiveness of our
pricing strategies. Such measures are not recognized in accordance with
GAAP and should not be viewed as an alternative to GAAP measures of
performance or liquidity, as applicable. The definitions of each of
these measures, further discussion of usefulness, and reconciliations of
non-GAAP measures to GAAP measures are provided herein.
Note on Forward-Looking Statements
This press release may contain “forward-looking statements” within
the meaning of the safe harbor provisions of the United States Private
Securities Litigation Reform Act of 1995. Words such as “expect,”
“estimate,” “project,” “budget,” “forecast,” “see”, “tend”,
“anticipate,” “target,” “outlook,” “guidance,” “intend,” “plan,” “may,”
“will,” “could,” “should,” “believes,” “predicts,” “potential,”
“continue,” and similar expressions are intended to identify such
forward-looking statements. Forward-looking statements in this press
release may include, without limitation, forecasts of performance,
growth, net sales, business activity, and other matters that involve
known and unknown risks, uncertainties and other factors that may cause
results, levels of activity, performance or achievements to differ
materially from results expressed or implied by this press release. Such
factors include, among others: conditions in the global economy and
capital markets; the inability of the Company to execute on its business
strategy; volatility in costs or disruption in the supply of the raw
materials utilized for our products; loss of market share to other
producers of chemical products; compliance with laws and regulations
impacting our business; changes in laws and regulations applicable to
our business; our inability to continue technological innovation and
successful introduction of new products; system security risk issues
that could disrupt our internal operations or information technology
services; the loss of customers; the market price of the Company’s
ordinary shares prevailing from time to time; the nature of other
investment opportunities presented to the Company from time to time; and
the Company’s cash flows from operations. Additional risks and
uncertainties are set forth in the Company’s reports filed with the
United States Securities and Exchange Commission, which are available at
http://www.sec.gov/
as well as the Company’s web site at
http://www.trinseo.com
.
As a result of the foregoing considerations, you are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date of this press release. All forward-looking
statements are qualified in their entirety by this cautionary statement.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20190122005860/en/
Press Contacts:
Trinseo
Donna St. Germain
Tel : +1
610-240-3307
Email: stgermain@trinseo.com
Makovsky
Doug Hesney
Tel: +1 212-508-9661
Email: dhesney@makovsky.com
Investor Contact:
Trinseo
David Stasse
Tel : +1
610-240-3207
Email: dstasse@trinseo.com
Source: Trinseo