Trinseo PLC - Quarter Report: 2015 June (Form 10-Q)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

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FORM 10-Q

 

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(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, 2015

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

 

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Trinseo S.A.

(Exact name of registrant as specified in its charter)

 

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1000 Chesterbrook Boulevard

Suite 300

Berwyn, PA 19312

(Address of Principal Executive Offices)

(610) 240-3200

(Registrant’s telephone number)

 

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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):

 

 

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 6, 2015, there were 48,777,934 shares of the registrant’s ordinary shares outstanding.

 

 

 

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TABLE OF CONTENTS

 

 

 

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Trinseo S.A.

Quarterly Report on Form 10-Q

For the quarterly period ended June 30, 2015 

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.”

In the first quarter of 2015, we completed a rebranding process to change our operating name and legal entities from “Styron” to “Trinseo,”  a name that we believe reflects our breadth as a company with broad global reach and a diverse portfolio of materials and technologies.

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, 2014 (“Annual Report”) filed with the Securities and Exchange Commission (“SEC”) on March 10, 2015 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.

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, 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, 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 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, 2015 and 2014 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 2014 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 10, 2015.

The December 31, 2014 condensed consolidated balance sheet data presented herein was derived from the Company’s December 31, 2014 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. 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.

Company Realignment

Until January 1, 2015, the chief executive officer, who is the Company’s chief operating decision maker, managed the Company’s operations under two divisions, Emulsion Polymers and Plastics, which included the following four reporting segments: Latex, Synthetic Rubber, Styrenics, and Engineered Polymers. Effective January 1, 2015, the Company was reorganized under two new divisions called Performance Materials and Basic Plastics & Feedstocks. The Performance Materials division now includes the following reporting segments: Synthetic Rubber, Latex, and Performance Plastics. The Basic Plastics & Feedstocks division represents a separate segment for financial reporting purposes. These condensed consolidated financial statements and related notes thereto have been recast to reflect this change in reporting segments. See Note 14 for more information.

 

NOTE 2—RECENT ACCOUNTING GUIDANCE

 

In April 2014, the Financial Accounting Standards Board (“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 Company adopted this guidance effective January 1, 2015, and the adoption did not have a significant impact on the Company’s financial position, results of operations, or disclosures.

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

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recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for public entities for annual and interim periods beginning after December 15, 2017.  The Company is currently assessing the impact of adopting this guidance on its financial statements and results of operations.

In January 2015, the FASB issued guidance to simplify income statement classification by removing the concept of extraordinary items from GAAP. The Company adopted this guidance effective January 1, 2015, and the adoption did not have a significant impact on the Company’s financial position or results of operations.

In April 2015, the FASB issued guidance that requires debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying value of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. This new guidance, which is to be applied on a retrospective basis, is effective for public companies for annual and interim periods beginning after December 31, 2015, with early adoption permitted. The Company will adopt this guidance effective January 1, 2016. The Company is currently assessing the impact of adopting this guidance on the statement of financial position. 

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 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, 2015 and December 31, 2014, respectively, the Company’s investment in Americas Styrenics was $164.4 million and $133.5 million, which was $100.6 million and $108.4 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 5.3 years as of June 30, 2015. The Company received dividends from Americas Styrenics of $30.0 million and $45.0 million during the three and six months ended June 30, 2015, respectively, compared to dividends of $7.5 million and $12.5 million during the three and six months ended June 30, 2014, respectively.  

As of June 30, 2015 and December 31, 2014, respectively, the Company’s investment in Sumika Styron Polycarbonate was $35.8 million and $34.1 million, which was $21.0 million and $21.3 million greater than the Company’s 50% share of the underlying net assets of Sumika Styron Polycarbonate. This amount 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 10.3 years as of June 30, 2015. The Company received no dividends from Sumika Styron Polycarbonate during the three and six months ended June 30, 2015, respectively, compared to dividends of zero and $1.0 million during the three and six months ended June 30, 2014, 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:

 

 

 

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NOTE 4—INVENTORIES

Inventories consisted of the following:

 

 

 

 

NOTE 5—GOODWILL AND INTANGIBLE ASSETS

Goodwill

The following table shows changes in the carrying amount of goodwill by segment from December 31, 2014 to June 30, 2015:

 

 

 

Other Intangible Assets

The following table provides information regarding the Company’s other intangible assets as of June 30, 2015 and December 31, 2014, respectively:

 

 

 

Amortization expense on other intangible assets totaled $4.4 million and $8.9 million for the three and six months ended June 30, 2015, respectively, and $5.1 million and $9.2 million for the three and six months ended June 30, 2014, respectively.

The following table details the Company’s estimated amortization expense for the next five years, excluding any

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amortization expense related to software currently in development:

 

 

 

 

NOTE 6—DEBT

Debt consisted of the following:

 

 

2018 Senior Secured Credit Facility

On June 17, 2010, the Company entered into a credit agreement, which was subsequently amended on February 2, 2011, July 28, 2011, February 13, 2012, August 9, 2012, January 19, 2013, and December 3, 2013 which 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 the amendment in January 2013, included a borrowing capacity of $300.0 million. As of December 31, 2014, the Company had no amounts outstanding under the 2018 Revolving Facility.  

In May 2015, upon completion of the refinancing transactions discussed below, the Company terminated the 2018 Senior Secured Credit Facility.  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, comprised entirely of the write-off of a portion of the existing unamortized deferred financing fees related to the 2018 Revolving Facility.  The remaining unamortized deferred financing fees under the 2018 Revolving Facility totaled $7.2 million, which remained capitalized and will be amortized along with new deferred financing fees over the life of the new revolving credit facility, discussed in further detail below.  

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 facility, with a $25.0 million swingline subfacility and a $35.0 million letter of credit subfacility (the “2020 Revolving

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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, 2015, $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).  The Borrowers will be required to pay a quarterly commitment fee in respect of any unused commitments under the 2020 Revolving Facility equal to 0.50% per annum.

As of June 30, 2015, the Company had no outstanding borrowings, and had $313.2 million (net of $11.8 million outstanding letters of credit) of funds available for borrowings under the 2020 Revolving Facility.

The Senior Credit Facility is collateralized by a security interest in substantially all of the assets of Trinseo Materials Operating S.C.A., as lead borrower, Trinseo Materials Finance, Inc., as co-borrower, and the guarantors thereunder including Trinseo Materials S.à r.l., certain U.S. subsidiaries and certain foreign subsidiaries organized in Luxembourg, The Netherlands, Hong Kong, Singapore, Ireland, Germany and Switzerland.

The Senior Credit Facility requires the Borrowers and their restricted subsidiaries to comply with customary affirmative and negative covenants, including limitations on their abilities to incur liens; make certain loans and investments; incur additional debt; merge, consolidate liquidate or dissolve; transfer or sell assets; pay dividends and other distributions to shareholders or make certain other restricted payments; enter into transactions with affiliates; restrict any restricted subsidiary from paying dividends or making other distributions or agree to certain negative pledge clauses; materially alter the business we conduct; prepay certain other indebtedness; amend certain material documents; and change our fiscal year.

The 2020 Revolving Facility contains a financial covenant that requires compliance with a springing first lien net leverage ratio test. If the outstanding balance under the 2020 Revolving Facility exceeds 30% of the $325.0 million borrowing capacity (excluding undrawn letters of credit up to $10.0 million and cash collateralized letters of credit) at a quarter-end, then the Company’s first lien net leverage ratio may not exceed 2.00 to 1.00.  As of June 30, 2015, the Company was in compliance with all debt covenant requirements under the Senior Credit Facility.

Fees and expenses incurred in connection with the issuance of the 2021 Term Loan B and the 2020 Revolving Facility were $12.0 million and $0.3 million, respectively, which were capitalized and recorded in “Deferred charges and other assets” in the condensed consolidated balance sheets.

For the 2021 Term Loan B, deferred financing fees and the 0.25% debt discount are being amortized over its 6.5 year term using the effective interest method.  For the 2020 Revolving Facility, deferred financing fees (along with an additional $7.2 million of unamortized deferred financing fees from the 2018 Revolving Facility) are being amortized over its 5.0 year term using the straight-line method.  Amortization of deferred financing fees and debt discounts are recorded in “Interest expense, net” in the condensed consolidated statements of operations.

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 IPO (see Note 1), 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

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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 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.

At any time prior to May 1, 2018, the Issuers may redeem the Euro Notes and/or the USD Notes in whole or in part, at their option at a redemption price equal to 100% of the principal amount of such notes plus the relevant applicable premium as of, and accrued and unpaid interest to, but not including, the redemption date. At any time and from time to time after May 1, 2018, the Issuers may redeem the Euro Notes and/or the USD Notes, in whole or in part, 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, but not including, the redemption date:  

 

In addition, at any time prior to May 1, 2018, the Issuers may redeem up to 40% of the aggregate principal amount of each of the USD Notes and the Euro Notes, either together or separately, at a redemption price equal to 106.750% of the principal amount thereof for the USD Notes and 106.375% of the principal amount thereof for the Euro Notes plus, in each case, accrued and unpaid interest to, but not including, the redemption date, in an amount equal to the aggregate gross proceeds from certain equity offerings.

The 2022 Senior Notes are the Issuers’ senior unsecured obligations and rank equally in right of payment with all of the Issuers’ existing and future indebtedness that is not expressly subordinated in right of payment thereto. The 2022 Senior Notes will be senior in right of payment to any future indebtedness that is expressly subordinated in right of payment thereto and effectively junior to (a) the Issuers’ existing and future secured indebtedness, including the Company’s accounts receivable facility and the Issuers’ Senior Credit Facility (discussed above), to the extent of the value of the collateral securing such indebtedness and (b) all existing and future liabilities of the Issuers’ non-guarantor subsidiaries.

The Indenture contains customary covenants that, among other things, limit the Issuers’ and certain of their subsidiaries’ ability to incur additional indebtedness and guarantee indebtedness, pay dividends or make other distributions, make investments, or prepay certain indebtedness, each subject to a number of exceptions and qualifications. Certain of these covenants, will be suspended during any period of time that (1) the 2022 Notes have investment grade ratings (as defined in the Indenture) and (2) no default has occurred and is continuing under the Indenture. In the event that the 2022 Senior Notes are downgraded to below an investment grade rating, the Issuers and certain subsidiaries will again be subject to the suspended covenants with respect to future events. As of June 30, 2015, the Company was in compliance with all debt covenant requirements under the Indenture.

Fees and expenses incurred in connection with the issuance of the 2022 Senior Notes were $16.0 million, which were capitalized and recorded in “Deferred charges and other assets” in the condensed consolidated balance sheets, and are being amortized into “Interest expense, net” in the condensed consolidated statements of operations over their 7.0 year term using the effective interest method.  

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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.

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

 

As of June 30, 2015 and December 31, 2014, there were no amounts outstanding under the Accounts Receivable Securitization Facility, with approximately $147.3 million and $136.1 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 balance sheet 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, 2015, the Company had open foreign exchange forward contracts with a notional U.S. dollar equivalent absolute value of $448.9 million. The following table displays the notional amounts of the most significant net foreign exchange hedge positions outstanding as of June 30, 2015.

 

 

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 sells a designated amount of euros and buys U.S. dollars 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

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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, 2015 have maturities occurring over a period of 17 months, and have a net notional U.S. dollar equivalent of $153.0 million.

Net Investment Hedge

As of June 30, 2015, a portion of the Company’s debt consists of €375.0 million of Euro Notes (see Note 6 for details).  The Company has designated the principal amount of these Euro Notes as a hedge 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 $2.4 million within accumulated other comprehensive loss as of June 30, 2015.

Summary of Derivative Instruments

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

 

 

 

The Company recorded gains of $7.3 million and losses of $13.7 million during the three and six months ended June 30, 2015 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 losses of $10.4 million and gains of $7.6 million during the three and six month periods, 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.

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As of June 30, 2015, 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 $0.8 million net loss from other comprehensive income (loss) into earnings related to the Company’s outstanding cash flow hedges as of June 30, 2015 based on current foreign exchange rates.

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

 

 

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:

 

 

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.

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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 sheets as of June 30, 2015 and December 31, 2014.

 

 

 

 

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 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, 2015 and December 31, 2014, respectively:

 

 

The fair value of the Company’s Term Loan B, USD Notes, Euro Notes, and 2019 Senior Notes (each Level 2 securities) is determined using over-the-counter market quotes and benchmark yields received from independent vendors.

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There were no other significant financial instruments outstanding as of June 30, 2015 and December 31, 2014.

NOTE 9—PROVISION FOR INCOME TAXES

 

 

 

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. Provision for income taxes for the three and six months ended June 30, 2014 were $5.5 million, resulting in a negative effective income tax rate of 13.9%,  and $18.2 million, resulting in a negative effective tax rate of 195.0%, respectively.

The effective income tax rate is impacted by losses primarily within our holding companies incorporated in Luxembourg, which do not provide a tax benefit to the Company. 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 (see Note 6 for further discussion).  Also included in these losses was non-deductible interest and stock-based compensation expense.  These nondeductible expenses unfavorably impacted the effective tax rate during the three and six months ended June 30, 2015.

For the three and six months ended June 30, 2014, losses primarily within our holding companies incorporated in Luxembourg, which do not provide a tax benefit to the Company, were approximately $73.6 million and $97.2 million during these respective periods. Included in these losses were payments made during the three months ended June 30, 2014 of $32.5 million related to an agreement with Dow to terminate the Latex JV Option Agreement and a portion of the fees related to the termination of the Advisory Agreement with Bain Capital of approximately $18.6 million (see Note 13 for further discussion).  These nondeductible expenses unfavorably impacted the effective tax rate during the three and six months ended June 30, 2014.

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, 2015 and December 31, 2014, 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 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; 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 condensed consolidated financial statements.

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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 6 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 2014 Annual Report.  

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:

 

 

 

 

 

As of June 30, 2015 and December 31, 2014, the Company’s benefit obligations included primarily in “Other noncurrent obligations” in the condensed consolidated balance sheets were $187.6 million and $196.6 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 $2.8 million and $7.6 million during the three and six months ended June 30, 2015, respectively. The Company expects to make additional cash contributions, including benefit payments to unfunded plans, of approximately $9.9 million to its defined benefit plans for the remainder of 2015.

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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 Company’s 2014 Omnibus Incentive Plan (see discussion below), no further restricted stock awards will be issued by the Parent on behalf of the Company.  

 

Time-based Restricted Stock Awards

For the six month period ended June 30, 2015, there were no grants of time-based restricted stock awards. Total compensation expense for time-based restricted stock awards was $0.9 million and $2.2 million for the three months ended June 30, 2015 and 2014, respectively, and $2.1 million and $4.7 million for the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, there was $3.0 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 2.0 years.

Modified Time-based Restricted Stock Awards

For the six month period ended June 30, 2015, there were no grants of modified time-based restricted stock awards. Total compensation expense recognized for modified time-based restricted stock awards was $0.9 million and $1.8  million for the three and six months ended June 30, 2015, respectively. As of June 30, 2015, there was $7.4 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 2.1 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 $0.1 million and $0.2 million for the three months ended June 30, 2015 and 2014, respectively, and $0.2 million and $0.5 million for the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015, there was $0.2 million in unrecognized compensation cost related to these retention awards. This cost is expected to be recognized over a period of 0.6 years.

2014 Omnibus Incentive Plan

In connection with the IPO, the Company’s Board of Directors approved the Trinseo S.A. 2014 Omnibus Incentive Plan (“2014 Omnibus Plan”), adopted on May 28, 2014, under which the maximum number of shares of common stock that may be delivered upon satisfaction of awards granted under such plan is 4.5 million shares. During the six months ended June 30, 2015, the Board of Directors of the Company approved equity award grants for certain directors, executives, and employees, comprised of restricted share units (or RSUs) and options to purchase shares.

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. 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 option awards, which contain an exercise term of nine years from the date of grant, vest in three equal annual installments beginning on the 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 or retirement or a termination of employment by the Company without cause in connection with a restructuring or

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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 of RSUs is equal to the fair market value of the Company’s common shares based on the closing price on the date of grant. During the three and six months ended June 30, 2015, the Company granted 23,785 and 436,323 RSUs, respectively, at a weighted-average grant date fair value of $27.81 and $18.67, respectively, per unit. Total compensation expense recognized for the RSUs was $0.5 million and $0.7 million for the three and six months ended June 30, 2015, respectively. As of June 30, 2015, there was $7.3 million of total unrecognized compensation cost related to the RSUs, which is expected to be recognized over a weighted-average period of 2.5 years.

The fair value for option awards is computed using the Black-Scholes pricing model, whose significant 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 Company’s stock price. During the three and six  months ended June 30, 2015, the Company granted 3,680 and 607,382 option awards, respectively, to purchase common shares at a weighted-average grant date fair value of $12.05 and $7.82, respectively, per option award.

Since the Company’s equity interests were privately held prior to the IPO in June 2014, there is limited publicly traded stock history, and as a result the expected volatility used in the Black-Scholes pricing model is based on the historical volatility of similar companies’ stock that are publicly traded as well as the Company’s debt-to-equity ratio. Until such time that the Company has enough publicly traded stock history to determine expected volatility based solely on its stock, 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 grants presented herein, 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 assumed to be zero based on historical and expected dividend activity.

The following are the weighted-average assumptions used within the Black-Scholes pricing model for grants during the six months ended June 30, 2015:

 

 

Total compensation expense for the option awards was $1.2 million and $1.4 million for the three and six months ended June 30, 2015, respectively. As of June 30, 2015, there was $3.3 million of total unrecognized compensation cost related to the option awards, which is expected to be recognized over a weighted-average period of 2.7 years.

 

NOTE 13—RELATED PARTY TRANSACTIONS 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 the terms of the Advisory Agreement, the Company paid $23.3 million of termination fees representing acceleration of the advisory fees for the remainder of the original term. The termination fee was paid in June 2014 using the proceeds from the IPO, and was recorded as an expense within “Selling, general and administrative expenses” in the condensed consolidated statement of operations for the three and six months ended June 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 $0.8 million for the three months ended June 30, 2015 and 2014, respectively, and $0.2 million and $2.0 

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million for the six months ended June 30, 2015 and 2014, respectively (excluding the termination fees noted above).

Bain Capital also provided advice pursuant to a 10-year transaction services agreement with fees payable equaling 1% of the transaction value of each financing, acquisition or similar transaction. In connection with the IPO, Bain Capital received $2.2 million of transaction fees, which were recorded within “Additional paid-in-capital” on the condensed consolidated balance sheet as of June 30, 2015 and December 31, 2014.  This transaction services agreement also terminated upon consummation of the Company’s IPO in June 2014.

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

NOTE 14—SEGMENTS

Until January 1, 2015, the chief executive officer, who is the Company’s chief operating decision maker, managed the Company’s operations under two divisions, Emulsion Polymers and Plastics, which included the following four reporting segments: Latex, Synthetic Rubber, Styrenics, and Engineered Polymers.

Effective January 1, 2015, the Company was reorganized under two new divisions called Performance Materials and Basic Plastics & Feedstocks. The Performance Materials division now includes the following reporting segments: Synthetic Rubber, Latex, and Performance Plastics. The Basic Plastics & Feedstocks division represents a separate segment for financial reporting purposes. This new organizational structure better reflects the nature of the Company by grouping together segments with similar strategies, business drivers and operating characteristics.

The information below for the three and six months ended June 30, 2014 has been recast to reflect this change in reporting segments. 

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, 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.  

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

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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

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. The sale closed on September 30, 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 for the six months ended June 30, 2014.  

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 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.

 

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 based upon the applicable foreign exchange rate in the period the payment was received). As a result, the Company recognized a gain on sale of $0.1 million within “Other expense, net” in the condensed consolidated statements of operations for the three and six months ended June 30, 2014.

NOTE 16—RESTRUCTURING

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 polycarbonate 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”). The Company also entered into a new long-term supply contract with a third party to supply polycarbonate in North America. These revised arrangements became operational in the fourth quarter of 2014. In addition, the Company executed revised supply contracts for certain raw materials that were processed at its polycarbonate manufacturing facility in Stade, Germany, which took effect January 1, 2015. These revised agreements are expected to facilitate improvements in future results of operations for the Basic Plastics & Feedstocks segment. Production at the Freeport facility ceased as of September 30, 2014, and decommissioning and demolition began thereafter, with completion in the first quarter of 2015.

The Company recorded certain restructuring charges during the year ended December 31, 2014 primarily relating to the reimbursement of decommissioning and demolition costs incurred by Dow. For the three and six months ended June 30, 2014, the Company recorded restructuring charges of $1.5 million relating to the accelerated depreciation of the related assets at Dow’s Freeport, Texas facility and other charges. Of the additional charges incurred during the

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remainder of 2014, $4.2 million remained accrued within “Accounts payable” in the condensed consolidated balance sheet as of December 31, 2014. For the six months ended June 30, 2015, the Company recorded the remainder of the expected restructuring charges of $0.5 million related to the reimbursement of decommissioning and demolition costs incurred by Dow, noting no charges were recorded during the three months ended June 30, 2015. 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 June 30, 2015.

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 throughout most of 2014.

For the year ended December 31, 2014, the Company recorded additional net restructuring charges of approximately $2.8 million, related primarily to incremental employee termination benefit charges, contract termination charges, and decommissioning costs (of which $1.5 million and $2.1 million were recorded during the three and six months ended June 30, 2014, respectively). 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. There were no additional restructuring charges recorded related to the Altona plant shutdown during the three and six months ended June 30, 2015. Of the remaining balances at June 30, 2015 and December 31, 2014, $1.1 million and $1.2 million, respectively, are recorded in “Accrued expenses and other current liabilities” and $0.4 million and $0.9 million, respectively, were recorded in “Other noncurrent liabilities” in the condensed consolidated balance sheet.

The following table provides a rollforward of the liability balances associated with the Altona plant shutdown for the six months ended June 30, 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:

 

 

 

 

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NOTE 18—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 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 common shares would have an anti-dilutive effect.

The following table presents basic EPS and diluted EPS for the three and six months ended June 30, 2015 and 2014, respectively.

 

 

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*Refer to Note 12 for discussion of RSUs and option awards granted to certain Company directors and employees. As net loss was reported for the three and six months ended June 30, 2014, potentially dilutive awards have not been included within the calculation of diluted EPS for those periods, as they would have an anti-dilutive effect.