Trinseo PLC - Quarter Report: 2014 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2014

or

For the transition period from                      to                     

Commission File Number: 001-36473

Trinseo S.A.

(Exact name of registrant as specified in its charter)

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  x    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  x    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):

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of November 13, 2014, there were 48,769,567 shares of the registrant’s ordinary shares outstanding.

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EXPLANATORY NOTE

Trinseo Materials Operating S.C.A., a Luxembourg partnership limited by shares (“Trinseo Materials”), and Trinseo Materials Finance, Inc., a Delaware corporation (together with Trinseo Materials, the “Subsidiary Registrants”) are two wholly-owned subsidiaries of Trinseo S.A., a public limited liability company (société anonyme) existing under the laws of Luxembourg (“Trinseo,” and together with its consolidated subsidiaries, the “Company”). The Subsidiary Registrants are the co-issuers of the Company’s 8.750% Senior Secured Notes due 2019 (the “Senior Notes”) and Trinseo is the parent guarantor of the Senior Notes. Trinseo’s registration statement on Form S-1 relating to the initial public offering of its ordinary shares was declared effective by the Securities and Exchange Commission on June 11, 2014. In reliance on Rule 12h-5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 3-10 of Regulation S-X, the Subsidiary Registrants are exempt from, and have ceased to file reports under the Exchange Act.

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Trinseo S.A.

Quarterly Report on Form 10-Q

For the quarterly period ended September 30, 2014

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 combined 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. 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,” which also 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.”

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 Registration Statement on Form S-1 declared effective by the Securities and Exchange Commission (“SEC”) on June 11, 2014 under “Risk Factors- Risks relating to our Business and Industry” and in Part II, Item 1A — “Risk Factors” of our Quarterly Report on Form 10-Q for the period ended June 30, 2014 filed with the SEC on August 11, 2014, 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. We caution you therefore against relying on any of 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.

Where You Can Find Additional Information

Our website is www.trinseo.com. Information contained on our website is not part of this Quarterly Report. Information that we file with or furnish to the SEC, including our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to or exhibits included in these reports are available for download, free of charge, on our website soon after such reports are filed with or furnished to the SEC. These reports and other information, including exhibits filed or furnished therewith, are also available at the SEC’s website at www.sec.gov. You may also obtain and copy any document we file with or furnish to the SEC at the SEC’s public reference room at 100 F Street, NE, Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the SEC’s public reference facilities by calling the SEC at 1-800-SEC-0330. You may request copies of these documents, upon payment of a duplicating fee, by writing to the SEC at its principal office at 100 F Street, NE, Room 1580, Washington, D.C. 20549.

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PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

TRINSEO S.A.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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TRINSEO S.A.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

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)

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’ Equity

(In thousands)

(Unaudited)

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 Flows

(In thousands)

(Unaudited)

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 Statements

(Dollars in thousands, unless otherwise stated)

(Unaudited)

NOTE A—BASIS OF PRESENTATION

The unaudited interim condensed consolidated financial statements of Trinseo S.A. and its subsidiaries (the “Company”) as of and for the periods ended September 30, 2014 and 2013 were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect all adjustments, consisting only of normal recurring adjustments, which, in the opinion of management, are considered necessary for the fair statement of the results for the periods presented. Because they cover interim periods, the statements and related notes to the financial statements do not include all disclosures normally provided in annual financial statements and, therefore, these statements should be read in conjunction with the 2013 audited consolidated financial statements included within the Company’s Registration Statement on Form S-1 (Registration No. 333-194561), which was declared effective by the SEC on June 11, 2014 (as amended, the “Registration Statement”).

The December 31, 2013 consolidated balance sheet data presented herein was derived from the Company’s December 31, 2013 audited consolidated financial statements, but does not include all disclosures required by GAAP for annual periods.

Reverse Stock Split and Initial Public Offering

On May 30, 2014, the Company amended its Articles of Association to effect a 1-for-436.69219 reverse stock split of its issued and outstanding common stock (“reverse split”) and to increase its authorized shares to 50.0 billion. All share and per share data have been retroactively adjusted in the accompanying financial statements to give effect to the reverse split.

On June 17, 2014, the Company completed an initial public offering (the “IPO”) of 11,500,000 ordinary shares at a price of $19.00 per share, which included 1,500,000 of shares sold pursuant to the underwriters’ exercise of their over-allotment option. The Company received cash proceeds of $203.2 million from this transaction, net of underwriting discounts. See Note L for more information.

NOTE B—RECENT ACCOUNTING GUIDANCE

In February 2013, the Financial Accounting Standards Board (“FASB”) issued amendments for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, except for obligations addressed within existing guidance. This guidance requires an entity to measure those obligations as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. This guidance also requires an entity to disclose the nature and amount of the obligation as well as other information about those obligations. The Company adopted this guidance on a retrospective basis effective January 1, 2014, and the adoption did not have a significant impact on the Company’s financial position or results of operations.

In July 2013, the FASB issued guidance to clarify the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The new guidance requires that unrecognized tax benefits be netted against all available same-jurisdiction losses or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the unrecognized tax benefits. The Company adopted this guidance prospectively effective January 1, 2014, and the adoption did not have a significant impact on the Company’s financial position or results of operations.

In April 2014, the FASB issued amendments to guidance for reporting discontinued operations and disposals of components of an entity. The amended guidance requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity’s financial results or a business activity classified as held for sale should be reported as discontinued operations. The amendments also expand the disclosure requirements for discontinued operations and add new disclosures for individually significant dispositions that do not qualify as discontinued operations. The amendments are effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2014 (early adoption is permitted only for disposals that have not been previously reported). The implementation of the amended guidance is not expected to have a material impact on the Company’s consolidated financial position or results of operations.

In May 2014, the FASB and the International Accounting Standards Board (“IASB”) jointly issued new guidance which clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP and International Financial Reporting Standards (“IFRS”). The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in

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exchange for those goods or services. This guidance is effective for public entities for annual and interim periods beginning after December 15, 2016. Early adoption is not permitted under GAAP and retrospective application is permitted, but not required. The Company is currently assessing the impact of adopting this guidance on its financial statements and results of operations.

In June 2014, the FASB issued updated guidance related to stock compensation. The updated guidance requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The updated guidance is effective for annual and interim periods beginning after December 15, 2015 and can be applied either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented and to all newly granted or modified awards thereafter. Early adoption is permitted. This guidance is not relevant to the Company’s currently outstanding awards; however, the Company will continue to evaluate the applicability of this guidance to future awards as necessary.

NOTE C—INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company is supplemented by two strategic joint ventures: Americas Styrenics LLC (“AmSty”, a polystyrene joint venture with Chevron Phillips Chemical Company LP) and Sumika Styron Polycarbonate Limited (“Sumika Styron”, a polycarbonate joint venture with Sumitomo Chemical Company, Limited). Investments held in the unconsolidated affiliates are accounted for by the equity method.

As of September 30, 2014 and December 31, 2013, respectively, the Company’s investment in AmSty was $131.5 million and $118.3 million. As of September 30, 2014 and December 31, 2013, respectively, the Company’s investment in AmSty was $113.0 million and $130.8 million less than the Company’s 50% share of AmSty’s underlying net assets. This amount represents the difference between the book value of assets contributed to the joint venture at the time of formation (May 1, 2008) and the Company’s 50% share of the total recorded value of the joint venture’s assets and certain adjustments to conform with the Company’s accounting policies. This difference is being amortized over a weighted average remaining useful life of the contributed assets of approximately 5.9 years as of September 30, 2014. The Company received dividends from AmSty of $7.5 million and $20.0 million during the three and nine months ended September 30, 2014, respectively, compared to dividends of $7.5 million during the three and nine months ended September 30, 2013.

As of September 30, 2014 and December 31, 2013, respectively, the Company’s investment in Sumika Styron was $33.0 million and $37.6 million. As of September 30, 2014 and December 31, 2013, respectively, the Company’s investment in Sumika Styron was $20.3 million and $20.8 million greater than the Company’s 50% share of Sumika Styron’s underlying net assets. This amount represents the fair value of certain identifiable assets which have not been recorded on the historical financial statements of Sumika Styron. This difference is being amortized over the remaining useful life of the contributed assets of 11.0 years as of September 30, 2014. The Company received dividends from Sumika Styron of zero and $1.0 million during the three and nine months ended September 30, 2014, respectively, compared to dividends of zero and $1.1 million during the three and nine months ended September 30, 2013, respectively.

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:

NOTE D—INVENTORIES

Inventories consisted of the following:

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NOTE E—GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table shows changes in the carrying amount of goodwill by segment from December 31, 2013 to September 30, 2014:

Other Intangible Assets

The following table provides information regarding the Company’s other intangible assets as of September 30, 2014 and December 31, 2013, respectively:

In March 2014, the Company entered into an agreement with material supplier JSR Corporation, Tokyo (“JSR”) to acquire its current production capacity rights at the Company’s rubber production facility in Schkopau, Germany for a purchase price of €19.0 million (approximately $26.1 million). Prior to this agreement, JSR held 50% of the capacity rights of one of the Company’s three solution styrene-butadiene rubber (“SSBR”) production trains in Schkopau. As a result, effective March 31, 2014, the Company had full capacity rights to this production train. The €19.0 million purchase price was recorded in “Other intangible assets, net” in the condensed consolidated balance sheet as of March 31, 2014 to be amortized over its estimated useful life of approximately 6 years. Further, the purchase price was recorded within capital expenditures in investing activities in the condensed consolidated statement of cash flows for the nine months ended September 30, 2014.

Amortization expense on other intangible assets totaled $5.4 million and $14.6 million for the three and nine months ended September 30, 2014, respectively, and $3.8 million and $11.6 million for the three and nine months ended September 30, 2013, respectively.

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:

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NOTE F—DEBT

Debt consisted of the following:

Senior Secured Credit Facility

In January 2013, the Company amended its credit agreement (“Senior Secured Credit Facility”) to, among other things, increase the Company’s revolving credit facility (“Revolving Facility”) borrowing capacity from $240.0 million to $300.0 million, decrease the borrowing rate of the Revolving Facility through a decrease in the applicable margin rate from 4.75% to 3.00% as applied to base rate loans (which shall bear interest at a rate per annum equal to the base rate plus the applicable margin (as defined therein)), or 5.75% to 4.00% as applied to LIBO rate loans (which shall bear interest at a rate per annum equal to the LIBO rate plus the applicable margin and the mandatory cost (as defined therein), if applicable), and extend the maturity date to January 2018. Concurrently, the Company repaid its then outstanding term loans under the Senior Secured Credit Facility (the “Term Loans”) of $1,239.0 million using the proceeds from its sale of $1,325.0 million aggregate principal amount of the 8.750% senior secured notes (“Senior Notes”) issued in January 2013 (refer below for further discussion).

Prior to the amendment, the Senior Secured Credit Facility required that the Company comply with certain affirmative and negative covenants, including restrictions with respect to payment of dividends and other distributions to shareholders, and financial covenants that include the maintenance of certain financial ratios. These ratios include both a maximum leverage ratio no greater than 5.25 to 1.00 and an interest coverage ratio no less than 2.00 to 1.00 for the most recent twelve-month period.

The amendment replaced the Company’s total leverage ratio requirement with a first lien net leverage ratio (as defined under the amended agreement) and removed the interest coverage ratio requirement. If the outstanding balance on the Revolving Facility exceeds 25% of the $300.0 million borrowing capacity (excluding undrawn letters of credit up to $10.0 million) at a quarter end, then the Company’s first lien net leverage ratio may not exceed 5.25 to 1.00 for the quarter ending March 31, 2013, 5.00 to 1.00 for the subsequent quarters through December 31, 2013, 4.50 to 1.00 for each of the quarters ending in 2014 and 4.25 to 1.00 for each of the quarters ending in 2015 and thereafter. As of September 30, 2014, the Company was in compliance with all debt covenant requirements under the Senior Secured Credit Facility.

As a result of this amendment and repayment of the Term Loans in January 2013, the Company recognized a $20.7 million loss on extinguishment of long-term debt during the first quarter of 2013, which consisted of the write-off of existing unamortized debt issuance cost and debt discount attributable to the Term Loans. Fees and expenses incurred in connection with this amendment were $5.5 million, which were capitalized within “Deferred charges and other assets” in the condensed consolidated balance sheet and are being amortized into “Interest expense, net” in the condensed consolidated statement of operations over the remaining term of the Revolving Facility using the straight-line method.

As of September 30, 2014, the Company had no outstanding borrowings, and had $293.1 million (net of $6.9 million outstanding letters of credit) of funds available for borrowings under the Revolving Facility.

Senior Notes

In January 2013, the Company issued $1,325.0 million 8.750% Senior Notes under the indenture. Interest on the Senior Notes is payable semi-annually on February 1^st and August 1^st of each year, which commenced on August 1, 2013. The notes will mature on February 1, 2019, at which time the principal amounts then outstanding will be due and payable. The proceeds from the issuance of the Senior Notes were used to repay all of the Company’s outstanding Term Loans and related refinancing fees and expenses.

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The Company may redeem all or part of the Senior Notes at any time prior to August 1, 2015 by paying a call premium, plus accrued and unpaid interest to the redemption date. The Company may redeem all or part of the Senior Notes at any time after August 1, 2015 at a redemption price equal to the percentage of principal amount set forth below plus accrued and unpaid interest, if any, on the notes redeemed, to the applicable date of redemption, if redeemed during the twelve-month period beginning on of the year indicated below:

In addition, at any time prior to August 1, 2015, the Company may redeem up to 35% of the original principal amount of the notes at a redemption price equal to 108.750% of the face amount thereof plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds that the Company raises in certain equity offerings. The Company may also redeem, during any 12-month period commencing from the issue date until August 1, 2015, up to 10% of the original principal amount of the Senior Notes at a redemption price equal to 103% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the date of redemption.

In July 2014, using proceeds from the Company’s IPO (see Note L), the Company redeemed $132.5 million in aggregate principal amount of the Senior Notes, including a 103% call premium totaling $4.0 million, together with accrued and unpaid interest thereon of $5.2 million. As a result of this redemption, during the third quarter of 2014 the Company incurred a loss on the extinguishment of debt of approximately $7.4 million, which included the above $4.0 million call premium and a $3.4 million write-off of related unamortized debt issuance costs. Pursuant to the Indenture, the Company may redeem another 10% of the original principal amount of the Senior Notes prior to August 1, 2015.

The Senior Notes rank equally in right of payment with all of the Company’s existing and future senior secured debt and pari passu with the Company and the Guarantors’ (as defined below) indebtedness that is secured by first-priority liens, including the Company’s Senior Secured Credit Facility (as defined above), to the extent of the value of the collateral securing such indebtedness and ranking senior in right of payment to all of the Company’s existing and future subordinated debt. However, claims under the Senior Notes effectively rank behind the claims of holders of debt, including interest, under the Senior Secured Credit Facility in respect of proceeds from any enforcement action with respect to the collateral or in any bankruptcy, insolvency or liquidation proceeding. The Senior Notes are unconditionally guaranteed on a senior secured basis by each of the Company’s existing and future wholly-owned subsidiaries that guarantee the Senior Secured Credit Facility (other than the Company’s subsidiaries in France and Spain) (the “Guarantors”). The note guarantees rank equally in right of payment with all of the Guarantors’ existing and future senior secured debt and senior in right of payment to all of the Guarantors’ existing and future subordinated debt. The notes are structurally subordinated to all of the liabilities of each of the Company’s subsidiaries that do not guarantee the notes.

The indenture contains covenants that, among other things, limit the Company’s ability and the ability of the Company’s restricted subsidiaries to incur additional indebtedness, pay dividends or make other distributions, subject to certain exceptions. If the Senior Notes are assigned an investment grade by the rating agencies and the Company is not in default, certain covenants will be suspended. If the ratings on the Senior Notes decline to below investment grade, the suspended covenants will be reinstated. As of September 30, 2014, the Company was in compliance with all debt covenant requirements under the indenture.

Fees and expenses incurred in connection with the issuance of Senior Notes were approximately $42.0 million, which were capitalized and included in “Deferred charges and other assets” in the condensed consolidated balance sheet, and are being amortized into “Interest expense, net” in the condensed consolidated statement of operations over the term of the Senior Notes using the effective interest rate method.

Accounts Receivable Securitization Facility

In May 2013, the Company amended its existing accounts receivable securitization facility (“Accounts Receivable Securitization Facility”) which increased its borrowing capacity from $160.0 million to $200.0 million, extended the maturity date to May 2016 and allows for the expansion of the pool of eligible accounts receivable to include previously excluded U.S. and Netherlands subsidiaries. As a result of the amendment, the Company incurred $0.7 million in fees, which were capitalized within “Deferred charges and other assets” in the condensed consolidated balance sheet and are being amortized into “Interest expense, net” in the condensed consolidated statement of operations using the straight-line method over the remaining term.

The Accounts Receivable Securitization Facility is subject to interest charges against the amount of outstanding borrowings as well as the amount of available, but undrawn borrowings. As a result of the amendment to the Accounts Receivable Securitization Facility, in regards to outstanding borrowings, fixed interest charges decreased from 3.25% plus commercial paper rates to 2.60% plus variable commercial paper rates. In regards to available, but undrawn borrowings, fixed interest charges decreased from 1.50% to 1.40%.

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As of September 30, 2014 and December 31, 2013, there were no amounts outstanding under the Accounts Receivable Securitization Facility, with approximately $186.1 million and $143.8 million, respectively, of accounts receivable available to support this facility, based on the pool of eligible accounts receivable.

NOTE G—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. The Company does not hold or enter into financial instruments for trading or speculative purposes.

During 2012, the Company entered into foreign exchange forward contracts with a notional U.S. dollar equivalent amount of $82.0 million. These contracts were settled in February and May 2013. The Company recognized no gains or losses during the three months ended September 30, 2013, and recognized losses of $0.6 million during the nine months ended September 30, 2013 related to these contracts.

In the third quarter of 2014, the Company entered into various foreign exchange forward contracts, each with an original maturity of less than three months. As of September 30, 2014, the Company had open foreign exchange forward contracts with a net notional U.S. dollar equivalent of $153.8 million. The following table displays the notional amounts of the most significant net foreign exchange hedge positions outstanding as of September 30, 2014.

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 a result, in accordance with the Company’s existing accounting policy, we recorded these foreign exchange forward contracts on a net basis, by counterparty within the condensed consolidated balance sheet.

The fair value of open foreign exchange forward contracts amounted to $13.3 million of net unrealized losses as of September 30, 2014, which was recorded in “Accounts payable” on the condensed consolidated balance sheet. The following tables summarize the financial assets and liabilities included in the condensed consolidated balance sheet:

The Company had no derivative assets or liabilities outstanding as of December 31, 2013.

As these foreign exchange forward contracts are not designated for hedge accounting treatment, changes in the fair value of underlying instruments are recognized in “Other expense (income), net” in the condensed consolidated statement of operations. The Company recorded losses from settlements and changes in the fair value of outstanding forward contracts of $19.5 million during the three months ended September 30, 2014. These losses largely offset net foreign exchange transaction gains of $21.8 million during the quarter which resulted from the remeasurement of the Company’s foreign currency denominated assets and liabilities. The cash settlements of these forward exchange forward contracts are included within operating activities in the condensed consolidated statement of cash flows.

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NOTE H—FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.

Level 1—Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3—Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

The following table summarizes the basis used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated balance sheet at September 30, 2014. As discussed in Notes G, there were no outstanding foreign exchange forward contracts as of December 31, 2013, and as such, there were no balances to be recorded at fair value at that date.

The Company uses an income approach to value its foreign exchange forward contracts, 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 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 September 30, 2014 and December 31, 2013, respectively:

There were no other significant financial instruments outstanding as of September 30, 2014 and December 31, 2013.

NOTE I—PROVISION FOR INCOME TAXES

Provision for income taxes for the three and nine months ended September 30, 2014 were $3.7 million and $21.9 million, resulting in a negative effective tax rate of 56.5% and 138.3%, respectively. Provision for income taxes for the three and nine months ended September 30, 2013 were $6.0 million, resulting in an effective tax rate of 54.9%, and $8.1 million, resulting in a negative effective tax rate of 32.5%, respectively.

The effective income tax rates for the three and nine months ended September 30, 2014 were impacted by losses of approximately $22.6 million and $119.8 million, respectively, primarily within our holding companies incorporated in Luxembourg, which did not provide a tax benefit to the Company. These losses included non-deductible interest and stock-based compensation expenses. Additionally, during the nine months ended September 30, 2014, these losses included certain other non-deductible expenses, such as a $32.5 million charge related to an agreement with Dow to terminate the Latex JV Option Agreement and approximately $18.6 million of fees related to the termination of the Advisory Agreement with Bain Capital (both incurred in the second quarter; see Note N). The effective income tax rates for the three and nine months ended September 30, 2013 were impacted by losses of $15.4 million and $59.7 million, respectively, primarily within our the holding companies incorporated in Luxembourg, stemming mainly from non-deductible interest and stock-based compensation expenses.

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Partially offsetting this unfavorable impact to the effective tax rate was a tax benefit recognized during the nine months ended September 30, 2014, as the Company effectively settled its 2010 and 2011 audits with the IRS and received a refund of $3.2 million in July 2014. As a result, the Company recorded a previously unrecognized tax benefit in the amount of $2.7 million, including penalties and interest, relating to its 2011 tax return filing. No similar tax benefits were recorded in the nine months ended September 30, 2013.

NOTE J—COMMITMENTS AND CONTINGENCIES

Environmental Matters

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated, based on current law, existing technologies and other information. As of September 30, 2014 and December 31, 2013, the Company had no accrued obligations for environmental remediation and restoration costs. Pursuant to the terms of the Styron sales and purchase agreement, the pre-closing environmental conditions were retained by Dow and the Company has been indemnified by Dow from and against all environmental liabilities incurred or relating to the predecessor periods. There are several properties which the Company now owns on which Dow has been conducting remediation to address historical contamination. Those properties include Allyn’s Point, Connecticut, Dalton, Georgia, and Livorno, Italy. There are other properties with historical contamination that are owned by Dow that the Company leases for its operations, including its facilities in Midland, Michigan, Schkopau, Germany, Terneuzen, The Netherlands, and Guaruja, Brazil. No environmental claims have been asserted or threatened against the Company, and the Company is not a potentially responsible party at any Superfund Sites.

Inherent uncertainties exist in the Company’s potential environmental liabilities primarily due to unknown conditions, whether future claims may fall outside the scope of the indemnity, changing governmental regulations and legal standards regarding liability, and evolving technologies for handling site remediation and restoration. In connection with the Company’s existing indemnification, the possibility is considered remote that environmental remediation costs will have a material adverse impact on the consolidated financial statements.

Purchase Commitments

In the normal course of business, the Company has certain raw material purchase contracts where it is required to purchase certain minimum volumes at current market prices. These commitments range from 1 to 7 years. In certain raw material purchase contracts, the Company has the right to purchase less than the required minimums and pay a liquidated damages fee, or, in case of a permanent plant shutdown, to terminate the contracts. In such cases, these obligations would be less than the annual commitment as disclosed in the 2013 consolidated financial statements.

The Company has service agreements with Dow which contain fixed annual fees. See Note N for further discussion.

Litigation Matters

From time to time, the Company may be subject to various legal claims and proceedings incidental to the normal conduct of business, relating to such matters as product liability, antitrust/competition, past waste disposal practices and release of chemicals into the environment. While it is impossible at this time to determine with certainty the ultimate outcome of these routine claims, the Company does not believe that the ultimate resolution of these claims will have a material adverse effect on the Company’s results of operations, financial condition or cash flow.

Legal costs, including those legal costs expected to be incurred in connection with a loss contingency, are expensed as incurred.

NOTE K—PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

The components of net periodic benefit costs for all significant plans were as follows:

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As of September 30, 2014 and December 31, 2013, the Company’s benefit obligations included in “Other noncurrent obligations” in the condensed consolidated balance sheets were $158.7 million and $163.2 million, respectively. The net periodic benefit costs are recognized in the condensed consolidated statement of operations as “Cost of sales” and “Selling, general and administrative expenses.”

The Company made cash contributions of approximately $1.5 million and $8.4 million during the three and nine months ended September 30, 2014, respectively. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately $7.0 million to its defined benefit plans for the remainder of 2014.

Affiliation Agreements and Successor Plans

A majority of Company employees are participants in various defined benefit pension and other postretirement plans which are administered and sponsored by Trinseo. In connection with the Acquisition, the Company and Dow entered into affiliation agreements in certain jurisdictions (the “Affiliation Agreements”) allowing employees who transferred from Dow to the Company as of June 17, 2010 to remain in the Dow operated pension plans (“Dow Plans”) until the Company established its own pension plans. The Affiliation Agreements ended on December 31, 2012. Effective January 1, 2013, all remaining employees of the Company who were previously participants of the Dow Plans in Switzerland and the Netherlands transferred to separately administered and sponsored pension plans of the Company (the “Successor Plans”). The benefit obligation and related plan assets in the Dow Plans belonging to the Company’s employees were transferred to the Successor Plans. As a result of the transfer, the Company recognized prior service credits and net losses of approximately $26.8 million and $1.4 million, respectively, in other comprehensive income for the nine months ended September 30, 2013.

NOTE L—STOCKHOLDERS’ EQUITY

On May 30, 2014, the Company amended its Articles of Association to effect a 1-for-436.69219 reverse split of its issued and outstanding common stock and to increase its authorized shares of common stock to 50.0 billion. Pursuant to the reverse split, every 436.69219 shares of the Company’s then issued and outstanding common stock was converted into one share of common stock. The reverse split did not change the par value of the Company’s common stock. The condensed consolidated financial statements have been retroactively adjusted to give effect to the reverse split.

On June 17, 2014, the Company completed the IPO of 11,500,000 ordinary shares at a price of $19.00 per share. The number of ordinary shares at closing included 1,500,000 of shares sold pursuant to the underwriters’ over-allotment option. The Company received cash proceeds of $203.2 million from this transaction, net of underwriting discounts. These net proceeds were used by the Company for: i) the July 2014 repayment of $132.5 million in aggregate principal amount of the 8.750% Senior Notes due 2019, together with accrued and unpaid interest thereon of $5.2 million and a call premium of $4.0 million (see Note F); ii) the payment of approximately $23.3 million in connection with the termination of the Advisory Agreement with Bain Capital (see Note N); iii) the payment of approximately $5.1 million of advisory, accounting, legal and printing expenses directly related to the offering which were recorded to additional paid-in capital in the condensed consolidated balance sheet; and iv) general corporate purposes.

NOTE M—STOCK-BASED COMPENSATION

Restricted Stock Awards

On June 17, 2010, Bain Capital Everest Manager Holding SCA, which we refer to as the “Parent”, authorized the issuance of up to 750,000 shares in time-based and performance-based restricted stock to certain key members of management. Any related compensation associated with these awards is allocated to the Company from the Parent. With the adoption of the Company’s 2014 Omnibus Incentive Plan (see discussion below), no further grants will be issued under the Parent’s restricted stock awards plan.

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Time-based Restricted Stock Awards

For the nine month period ended September 30, 2014, there were no grants of time-based restricted stock awards. Total compensation expense for time-based restricted stock awards was $1.1 million and $2.7 million for the three months ended September 30, 2014 and 2013, respectively, and $5.8 million and $6.6 million for the nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014, there was $6.3 million of total unrecognized compensation cost related to time-based restricted stock awards. This cost is expected to be recognized over a weighted-average period of 2.8 years.

Performance-based Restricted Stock Awards

For the nine month period ended September 30, 2014, there were no grants of performance-based restricted stock awards. In previous periods, the performance-based restricted stock awards contained provisions wherein vesting was subject to the full satisfaction of both time and performance vesting criterion. The performance component of the awards could only be satisfied if certain targets were achieved based on various returns realized by the Company’s shareholders on a change in control or an IPO. The time vesting requirements for the performance-based restricted stock generally vested in the same manner as the related time-based award. Prior to the Company’s IPO, the Company had not recorded any compensation expense related to these awards as the likelihood of achieving the existing performance condition of a change in control or IPO was not deemed to be probable.

Prior to the completion of the Company’s IPO, on June 10, 2014 the Parent entered into agreements to modify the outstanding performance-based restricted stock awards held by the Company’s employees to remove the performance-based vesting condition associated with such awards related to the achievement of certain investment returns (while maintaining the requirement for a change in control or IPO). This modification also changed the time-based vesting requirement associated with such shares to provide that any shares which would have satisfied the time-based vesting condition previously applicable to such shares on or prior to June 30, 2017 will instead vest on June 30, 2017, subject to the holder remaining continuously employed by us through such date. Any such shares that are subject to a time-based vesting condition beyond June 30, 2017 will remain subject to the time-based vesting condition previously applicable to such awards. Henceforth, these awards will be described as the Company’s modified time-based restricted stock awards.

On June 17, 2014, with the completion of the Company’s IPO, the remaining performance condition associated with these modified time-based restricted stock awards was achieved. As a result, the Company has begun recognizing compensation expense related to these awards based on the vesting described above. Total compensation expense for modified time-based restricted stock awards was $1.3 million for the three and nine months ended September 30, 2014, respectively. As of September 30, 2014, there was $12.3 million of total unrecognized compensation cost related to these awards, which will be recognized over a weighted-average period of 2.9 years.

Management Retention Awards

During the year ended December 31, 2012, the Parent agreed to retention awards with certain officers. These awards generally vest over one to four years, and are payable upon vesting subject to the participant’s continued employment with the Company on the vesting date. Compensation expense related to these retention awards is equivalent to the value of the award, and is being recognized ratably over the applicable service period. Total compensation expense for these retention awards was $0.2 million and $0.3 million for the three months ended September 30, 2014 and 2013, respectively, and $0.7 million and $1.1 million for the nine months ended September 30, 2014 and 2013, respectively. As of September 30, 2014, there was $0.6 million in unrecognized compensation cost related to these retention awards. This cost is expected to be recognized over a period of 1.3 years.

2014 Omnibus Incentive Plan

In connection with the IPO, the Company’s board of directors approved the Trinseo S.A. 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”), adopted on May 28, 2014, under which the maximum number of shares of common stock that may be delivered upon satisfaction of awards granted under such plan is 4.5 million shares. Following the IPO, all equity-based awards granted by the Company will be granted under the 2014 Omnibus Plan. The 2014 Omnibus Plan provides for awards of stock options, share appreciation rights, restricted stock, unrestricted stock, stock units, performance awards, cash awards and other awards convertible into or otherwise based on shares of the Company’s common stock. For a full description of all provisions of this plan, refer to the Company’s Registration Statement, to which the 2014 Omnibus Plan in full has been filed as an exhibit.

In connection with the IPO, two of the Company’s newly appointed independent directors (Messrs. Cote and De Leener) received a grant of 4,736 restricted stock units, respectively, under the 2014 Omnibus Plan each with a grant date fair value of $0.1 million. These awards will vest in full on the first anniversary of the date of grant, subject to the director’s continued service as a member of the Company’s board through such date. Total compensation expense for these restricted stock units was less than $0.1 million for the three and nine months ended September 30, 2014, respectively.

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NOTE N—RELATED PARTY AND DOW TRANSACTIONS

In connection with the Acquisition, the Company entered into a ten year initial term advisory agreement with Bain Capital (the “Advisory Agreement”) wherein Bain Capital 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 and pursuant to its terms, the Company paid $23.3 million of termination fees representing acceleration of the advisory fees for the remainder of the original term. The termination fees were paid in June 2014 using the proceeds from the IPO, and were recorded as an expense within “Selling, general and administrative expenses” in the condensed consolidated statements of operations for the nine months ended September 30, 2014. Bain Capital will continue to provide an immaterial level of ad hoc advisory services for the Company going forward. In conjunction with the above, we paid Bain Capital fees (including out-of-pocket expenses) of $0.1 million and $1.2 million for the three months ended September 30, 2014 and 2013, respectively, and $2.2 million and $3.6 million for the nine months ended September 30, 2014 and 2013, respectively (excluding the termination fees noted above).

Bain Capital also provides advice pursuant to a 10-year transaction services agreement with fees payable equaling 1% of the transaction value of each financing, acquisition or similar transaction. In connection with the IPO, Bain Capital received $2.2 million of transaction fees, which were recorded within “Additional paid-in-capital” on the condensed consolidated balance sheet as of September 30, 2014 (see Note L). Bain Capital also received fees of approximately $13.9 million related to the issuance of the Senior Notes and the amendment to the Senior Secured Credit Facility in January 2013, which were included in the financing fees capitalized and included in “Deferred charges and other assets” in the condensed consolidated balance sheet (see Note F for further discussion).

In connection with the Acquisition in 2010, certain of the Company’s affiliates entered into a latex joint venture option agreement (the “Latex JV Option Agreement”) with Dow, pursuant to which Dow was granted an irrevocable option to purchase 50% of the issued and outstanding interests in a joint venture to be formed by Dow and the Company’s affiliates with respect to the SB Latex business in Asia, Latin America, the Middle East, Africa, Eastern Europe, Russia and India. On May 30, 2014, the Company’s affiliates entered into an agreement with Dow to terminate the Latex JV Option Agreement, Dow’s rights to the option, and all other obligations thereunder, in exchange for a termination payment of $32.5 million. This termination payment was made on May 30, 2014, and the termination of the Latex JV Option Agreement became effective as of such date. This termination payment was recorded as an expense within “Other expense (income), net” in the condensed consolidated statements of operations for the nine months ended September 30, 2014.

NOTE O—SEGMENTS

The Company operates four segments under two principal business units. The Emulsion Polymers business unit includes a Latex segment and a Synthetic Rubber segment. The Plastics business unit includes a Styrenics segment and an Engineered Polymers segment.

The Latex segment produces styrene-butadiene latex (“SB latex”) primarily for coated paper and packaging board, carpet and artificial turf backings, as well as a number of performance latex applications. The Synthetic Rubber segment produces synthetic rubber products used predominantly in tires, with additional applications in polymer modification and technical rubber goods, including conveyer and fan belts, hoses, seals and gaskets. The Styrenics and Engineered Polymers segments offer complementary plastics products with formulations developed for durable applications, such as consumer electronics, automotive and construction. Through these two segments, the Company provides a broad set of plastics product solutions to its customers.

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Corporate unallocated includes certain corporate overhead costs, loss on extinguishment of long-term debt, and certain other income and expenses.

The primary measure of segment operating performance is EBITDA, which is defined as net income (loss) before interest, income taxes, depreciation and amortization. EBITDA is a key metric that is used by management to evaluate business performance in comparison to budgets, forecasts, and prior year financial results, providing a measure that management believes reflects the Company’s core operating performance. EBITDA is useful for 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 P—DIVESTITURES

EPS Divestiture

In June 2013, the Company’s board of directors approved the sale of its expandable polystyrene (“EPS”) business within the Company’s Styrenics segment, under a sale and purchase agreement which was signed in July 2013. The sale closed on September 30, 2013 and the Company received $15.2 million of sales proceeds during the third quarter of 2013, subject to a $0.7 million working capital adjustment, which was paid by the Company during the first quarter of 2014 and is reflected within investing activities in the condensed consolidated statement of cash flows the nine months ended September 30, 2014. The Company recognized a loss from the sale of $4.2 million recorded in “Other expense (income), net” in the condensed consolidated statement of operations for the nine months ended September 30, 2013, of which $1.0 million was recognized during the three months ended September 30, 2013.

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EPS business results of operations were not classified as discontinued operations as the Company will have significant continuing cash flows as a result of a long-term supply agreement of styrene monomer to the EPS business, which was entered into contemporaneously with the sale and purchase agreement. The supply agreement will have an initial term of approximately 10 years from the closing date of the sale and will continue year-to-year thereafter. Under the supply agreement, we will supply a minimum of approximately 77 million pounds and a maximum of approximately 132 million pounds of styrene monomer annually or equivalent to 70% to 100% of the EPS business’s historical production consumption.

Further, 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 will receive an incremental payment of €0.5 million to be payable in the first half of 2015. As the meeting of this EBITDA threshold is not yet considered probable, the Company has not recorded the contingent gain on sale related to this potential incremental payment as of September 30, 2014.

Livorno Land Sale

In April 2014, the Company completed the sale of a portion of land at its manufacturing site in Livorno, Italy for a purchase price of €4.95 million (approximately $6.8 million). As a result, the Company recognized a gain on sale of $0.1 million within “Other expense (income), net” in the condensed consolidated statements of operations for the nine months ended September 30, 2014. As of December 31, 2013, this land was classified as held-for-sale within the caption “Other current assets” in the condensed consolidated balance sheet.

NOTE Q—RESTRUCTURING

Restructuring in Engineered Polymers Business

During the second quarter of 2014, the Company announced a planned restructuring within its Engineered Polymers business to exit the commodity market for polycarbonate in North America and to terminate existing arrangements with Dow regarding manufacturing services for the Company at Dow’s Freeport, Texas facility. The Company also entered into a new long-term supply contract with a third party to supply polycarbonate in North America. These revised arrangements are expected to become operational in the fourth quarter of 2014. In addition, the Company has executed revised supply contracts for certain raw materials that are processed at its polycarbonate manufacturing facility in Stade, Germany, which is expected to take effect beginning January 1, 2015. These revised agreements are expected to facilitate improvements in future results of operations for the Engineered Polymers segment.

For the three and nine months ended September 30, 2014, the Company recorded restructuring charges of $2.0 million and $3.5 million, respectively, relating to the accelerated depreciation of the related assets at Dow’s Freeport, Texas facility and other charges. These charges were included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations, and were allocated entirely to the Engineered Polymers segment. Production at the Freeport, Texas facility ceased as of September 30, 2014, and decommissioning and demolition is expected to occur in the fourth quarter of 2014 and throughout 2015. The Company is likely to incur charges, not to exceed $7.0 million, in conjunction with the reimbursement of Dow’s expected decommissioning and demolition costs from this facility, which will be expensed as incurred.

Altona Plant Shutdown

In July 2013, the Company’s board of directors approved the plan to close the Company’s latex manufacturing facility in Altona, Australia. This restructuring plan was a strategic business decision to improve the results of the overall Latex segment. The facility manufactured SB latex used in the carpet and paper markets. Production at the facility ceased in the third quarter of 2013, followed by decommissioning, with demolition expected throughout 2014. As a result of the plant closure, the Company recorded restructuring charges of $10.8 million for the year ended December 31, 2013 ($2.5 million and $9.0 million of which were recorded in the three and nine month periods ended September 30, 2013, respectively). These charges consisted of property, plant and equipment and other asset impairment charges, employee termination benefit charges, contract termination charges, and incurred decommissioning charges, of which approximately $4.8 million remained accrued on the Company’s consolidated balance sheet as of December 31, 2013. For the three and nine months ended September 30, 2014, the Company recorded additional restructuring charges of approximately $0.7 million and $2.8 million, respectively, related to incremental employee termination benefit charges, contract termination charges, and decommissioning costs. These charges were included in “Selling, general and administrative expenses” in the condensed consolidated statements of operations, and were allocated entirely to the Latex segment. The remaining employee termination benefits, contract termination costs, and decommissioning costs are recorded in “Accrued expenses and other current liabilities” in the condensed consolidated balance sheet.

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The following table provides a rollforward of the liability balances associated with the Altona plant shutdown:

NOTE R—ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of accumulated other comprehensive income (loss), net of income taxes, consisted of:

NOTE S—EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share (“basic EPS”) is computed by dividing net income (loss) available to common shareholders by the weighted average number of the Company’s common shares outstanding for the applicable period. Diluted earnings (loss) per share (“diluted EPS”) is calculated using net income (loss) available to common shareholders divided by diluted weighted-average shares of common shares outstanding during each period, which includes unvested restricted shares. Diluted EPS considers the impact of potentially dilutive securities except in periods in which there is a loss because the inclusion of the potential common shares would have an anti-dilutive effect.

The following table presents basic EPS and diluted EPS for the three and nine months ended September 30, 2014 and 2013, respectively. These balances have been retroactively adjusted to give effect to the Company’s 1-for-436.69219 reverse stock split declared effective on May 30, 2014, discussed in Note L to the condensed consolidated financial statements.

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NOTE T—SUBSEQUENT EVENTS

In October 2014, the Company announced that effective January 1, 2015, it will realign its business divisions, creating two new business groups called Performance Materials and Basic Plastics and Feedstocks. This new alignment will better reflect the nature of our businesses, grouping together businesses with similar strategies and aspirations, with the intention of accelerating growth in Performance Materials and optimizing profitability and cash generation in Basic Plastics and Feedstocks. The Performance Materials division will include the following reporting segments: Rubber, Latex and Performance Plastics (consisting of the Automotive and Consumer Essential Markets businesses). The Basic Plastics and Feedstocks division will also represent a separate segment for reporting purposes and will include the following businesses: Styrenic Polymers (Polystyrene, ABS, SAN), Polycarbonate, and Styrene Monomer.

NOTE U—SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

In connection with the issuance of the Senior Notes by Trinseo Materials Operating S.C.A. and Trinseo Materials Finance, Inc. (the “Issuers”), this supplemental guarantor financial statement disclosure is included in accordance with Rule 3-10 of Regulation S-X. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on a senior unsecured basis, in each case, subject to certain exceptions, by Trinseo (the “Parent Guarantor”) and by certain subsidiaries (together, the “Guarantor Subsidiaries”).

Each of the Guarantor Subsidiaries is 100 percent owned by the Company. None of the other subsidiaries of the Company, either direct or indirect, guarantee the Senior Notes (together, the “Non-Guarantor Subsidiaries”). The Guarantor Subsidiaries of the Senior Notes, excluding the Parent Guarantor, will be automatically released from those guarantees upon the occurrence of certain customary release provisions.

The following supplemental condensed consolidating financial information is presented to comply with the Company’s requirements under Rule 3-10 of Regulation S-X:

The Condensed Consolidating Financial Statements are presented using the equity method of accounting for its investments in 100 percent owned subsidiaries. Under the equity method, the investments in subsidiaries are recorded at cost and adjusted for the share of the subsidiaries cumulative results of operations, capital contributions, distributions and other equity changes. The elimination entries principally eliminate investments in subsidiaries and intercompany balances and transactions. The financial information in this footnote should be read in conjunction with the Condensed Consolidated Financial Statements presented and other notes related thereto contained within this Quarterly Report.

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SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

(In thousands)