Trinseo Reports Fourth Quarter and Record Full Year 2017 Financial Results; Increases 2018 Full Year Outlook

Year Ended 2017 Summary

• Net Income of $328 million and diluted EPS of $7.30
• Adjusted EPS of $8.13
• Adjusted EBITDA of $642 million
• Cash provided by operating activities of $391 million and Free Cash
  Flow of $244 million

Fourth Quarter 2017 Summary

• Net Income of $118 million and diluted EPS of $2.63
• Adjusted EPS of $2.14
• Adjusted EBITDA of $169 million
• Cash provided by operating activities of $196 million and Free Cash
  Flow of $158 million

BERWYN, Pa.–(BUSINESS WIRE)–$TSE #earnings–Trinseo (NYSE: TSE):

Trinseo
(NYSE: TSE), a global materials company and manufacturer of plastics,
latex binders and synthetic rubber, today reported its fourth quarter
and record full year 2017 financial results with net sales of $1,102
million and $4,448 million, respectively; net income of $118 million and
$328 million, respectively; and earnings per diluted share of $2.63 and
$7.30, respectively. Fourth quarter and full year Adjusted EBITDA was
$169 million and $642 million, respectively, and Adjusted EPS was $2.14
and $8.13, respectively.

Net sales in the fourth quarter increased 20% versus prior year driven
primarily by the pass through of higher raw material costs as well as
currency. Fourth quarter net income of $118 million, which included a
pre-tax gain of approximately $22 million related to changes made to
certain Company pension plans, was $39 million higher than prior year.
Fourth quarter Adjusted EBITDA of $169 million was $27 million higher
than prior year. The higher operational profitability was due primarily
to higher styrene, polystyrene, polycarbonate, and Latex Binders margins
as well as higher Performance Plastics sales volume. These impacts were
partially offset by lower Synthetic Rubber sales volume.

Net sales in the full year increased 20% versus prior year driven
primarily by the pass through of higher raw material costs. Full year
net income of $328 million was $10 million higher than prior year. This
increase was driven by improved performance in the Feedstocks, Basic
Plastics, and Latex Binders segments due to higher margin. These
improvements were partially offset by lower performance in the Americas
Styrenics, Synthetic Rubber, and Performance Plastics segments, in
addition to a $65 million pre-tax loss on extinguishment of debt in the
current year. Adjusted EBITDA in the full year of $642 million was $31
million higher than prior year which was comprised of about $55 million
of fundamental business improvement, partially offset by about $24
million of unfavorable net timing impacts.

Commenting on the Company’s performance, Chris Pappas, Trinseo President
and Chief Executive Officer, said, “We continue to be encouraged by our
performance. Our fourth quarter results were above the guidance we
provided during our third quarter call due to strong operating
conditions in several segments as well as pricing initiatives that
resulted in higher than expected margins. For the second consecutive
year we had record net income and Adjusted EBITDA.”

Pappas continued, “We also had very strong cash generation during the
year, and we continue to return cash to shareholders. During 2017 we
repurchased approximately 1.4 million shares, utilizing about $89
million of cash, and we increased the dividend by 20%. In total, we
returned nearly $150 million to shareholders via these actions. In
addition, we completed our first acquisition, API Plastics, and we
continue to make excellent progress on our other growth initiatives,
including the SSBR expansion and pilot plant in Synthetic Rubber, and
the ABS capacity in China, which are now all in operation.”

Fourth Quarter Results and Commentary by Business Segment

• Latex Binders net sales of $250 million for the quarter
  increased 4% versus prior year primarily from the pass through of
  higher raw material costs. Lower sales volume decreased revenue by
  11%, excluding the divested Latin America business, driven by lower
  sales volume in the North America and Europe paper and carpet markets.
  Adjusted EBITDA of $33 million was $9 million above prior year from
  higher margin in Asia due to better market conditions, which was
  partially offset by lower sales volume.
• Synthetic Rubber net sales of $127 million for the quarter
  increased 2% versus prior year primarily due to currency as well as
  the pass through of higher raw material costs. These impacts were
  partially offset by lower sales volume which was driven by customer
  destocking, shipment delays, and a softer tire market. Adjusted EBITDA
  of $15 million was $14 million below prior year from lower sales
  volume as well as favorable prior year net timing impacts.
• Performance Plastics net sales of $227 million for the quarter
  was 37% above prior year including a 9% increase from the acquisition
  of API Plastics. In addition, net sales increased due to higher sales
  volume to the North America automotive and Asia consumer electronics
  and automotive markets as well as the pass through of higher raw
  material costs. Adjusted EBITDA of $43 million was $11 million above
  prior year primarily from higher sales volume.
• Basic Plastics net sales of $395 million for the quarter was
  22% above prior year due mainly to the pass through of higher raw
  material costs, currency, and higher ABS sales volume. Adjusted EBITDA
  of $44 million was $11 million above prior year due primarily to
  higher polystyrene and polycarbonate margin in Europe, from more
  favorable market conditions, as well as higher ABS sales volume.
• Feedstocks net sales of $103 million for the quarter was 61%
  above prior year due to higher styrene-related sales volume as well as
  higher styrene prices. Adjusted EBITDA of $24 million was $10 million
  above prior year from higher styrene margin in Europe.
• Americas Styrenics Adjusted EBITDA of $31 million for the
  quarter was flat versus prior year as higher margin was offset by
  lower polystyrene sales volume.

Fourth Quarter and Full Year Cash Generation

Cash provided by operating activities for the fourth quarter was $196
million and capital expenditures were $38 million, resulting in Free
Cash Flow for the quarter of $158 million. Fourth quarter cash from
operations and Free Cash Flow included a favorable impact of
approximately $34 million from lower working capital. Cash provided by
operating activities for the full year was $391 million and capital
expenditures were $147 million, resulting in Free Cash Flow for the year
of $244 million. Full year cash from operations and Free Cash Flow
included an unfavorable impact of approximately $127 million from higher
working capital primarily from increasing raw material prices as well as
additional working capital requirements from growth initiatives such as
the acquisition of API Plastics, and the new SSBR and ABS capacity.

At the end of the year the Company had $433 million of cash reflecting
the expenditures of $82 million for the purchase of API Plastics, net of
cash acquired, as well as $128 million related to the successful debt
refinancing earlier in the year. For a reconciliation of Free Cash Flow
to cash provided by operating activities, see note 3 below.

Outlook

• First quarter 2018 net income of $104 million to $113 million, and
  earnings per diluted share of $2.34 to $2.52
• First quarter 2018 Adjusted EBITDA of $175 million to $185 million and
  Adjusted EPS of $2.34 to $2.52

The Company is updating previously issued guidance as follows:

• Full year 2018 net income of $369 million to $386 million and earnings
  per diluted share of $8.26 to $8.63
• Full year 2018 Adjusted EBITDA of $640 million to $660 million and
  Adjusted EPS of $8.26 to $8.63

Commenting on the outlook for the first quarter and full year 2018
Pappas said, “We expect strong performance in the first quarter from
higher styrene margins, including impacts from planned and unplanned
styrene production outages, as well as continued, healthy fundamentals
across our segments.”

Pappas continued, “Looking ahead to the full year performance, we are
increasing our prior 2018 net income and Adjusted EBITDA guidance as we
continue to see strong business fundamentals, and as we expect a
favorable impact from unplanned styrene outages in the first quarter. In
addition, we expect continued strong cash generation for the year. As we
move forward, we remain committed to balancing future growth initiatives
with returning capital to shareholders. I am very proud of the company’s
performance in 2017, and we remain focused on achieving a very strong
2018 and delivering returns to shareholders.”

For a reconciliation of fourth quarter and full year 2017, as well as
first quarter and full year 2018, net income to Adjusted EBITDA and
Adjusted EPS, see note 2 below. Additionally, refer to the appendix
within Exhibit 99.3 of our Form 8-K, dated February 19, 2018, for
further details on how net timing impacts are defined and calculated for
our segments.

Conference Call and Webcast Information

Trinseo will host a conference call to discuss its fourth quarter and
full year 2017 financial results tomorrow, Tuesday, February 20, 2018 at
10 AM Eastern Time.

Commenting on results will be Chris Pappas, President and Chief
Executive Officer, Barry Niziolek, Executive Vice President and Chief
Financial Officer, and David Stasse, Vice President, Treasury and
Investor Relations. The conference call will be available by phone at:

Participant Toll-Free Dial-In Number: +1 (833) 241-7248
Participant
International Dial-In Number: +1 (647) 689-4212
Conference ID /
passcode: 5197679

The Company will also offer a live Webcast of the conference call with
question and answer session via the registration
page of the Trinseo Investor Relations website.

Trinseo has posted its fourth quarter and full year 2017 financial
results, including management’s commentary, on the Company’s Investor
Relations website. The presentation slides will also be made
available in the webcast player prior to the conference call. The
Company will also furnish copies of the financial results press release
and presentation slides to investors by means of a Form 8-K filing with
the U.S. Securities and Exchange Commission.

A replay of the conference call and transcript will be archived on the
Company’s Investor Relations website shortly following the conference
call. The replay will be available until February 20, 2019.

About Trinseo

Trinseo (NYSE: TSE) is a global materials solutions provider and
manufacturer of plastics, latex binders, and synthetic rubber. We are
focused on delivering innovative and sustainable solutions to help our
customers create products that touch lives every day — products that are
intrinsic to how we live our lives — across a wide range of end-markets,
including automotive, appliances, consumer electronics, medical devices,
electrical, building and construction, textile, paper and board,
footwear and tires. Trinseo had approximately $4.4 billion in net sales
in 2017, with 16 manufacturing sites around the world, and approximately
2,200 employees. For more information visit www.trinseo.com

Use of non-GAAP measures

In addition to using standard measures of performance and liquidity
that are recognized in accordance with accounting principles generally
accepted in the United States of America (“GAAP”), we use additional
measures of income excluding certain GAAP items (“non-GAAP measures”),
such as Adjusted EBITDA and, Adjusted EPS and measures of liquidity
excluding certain GAAP items, such as Free Cash Flow. We believe these
measures are useful for investors and management in evaluating business
trends and performance each period. These income measures are
also used to manage our business and assess current period
profitability, as well as to provide an appropriate basis to evaluate
the effectiveness of our pricing strategies. Such measures are not
recognized in accordance with GAAP and should not be viewed as an
alternative to GAAP measures of performance or liquidity, as applicable.
The definitions of each of these measures, further discussion of
usefulness, and reconciliations of non-GAAP measures to GAAP measures
are provided herein.

Note on Forward-Looking Statements

This press release may contain “forward-looking statements” within
the meaning of the safe harbor provisions of the United States Private
Securities Litigation Reform Act of 1995. Words such as “expect,”
“estimate,” “project,” “budget,” “forecast,” “outlook,” “guidance,”
“anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,”
“believes,” “predicts,” “potential,” “continue,” and similar expressions
are intended to identify such forward-looking statements.
Forward-looking statements in this press release may include, without
limitation, forecasts of growth, net sales, business activity,
acquisitions, financings and other matters that involve known and
unknown risks, uncertainties and other factors that may cause results,
levels of activity, performance or achievements to differ materially
from results expressed or implied by this press release. Such factors
include, among others: conditions in the global economy and capital
markets, volatility in costs or disruption in the supply of the raw
materials utilized for our products; loss of market share to other
producers of styrene-based chemical products; compliance with
environmental, health and safety laws; changes in laws and regulations
applicable to our business; our inability to continue technological
innovation and successful introduction of new products; system security
risk issues that could disrupt our internal operations or information
technology services; the loss of customers; the market price of the
Company’s ordinary shares prevailing from time to time; the nature of
other investment opportunities presented to the Company from time to
time; and the Company’s cash flows from operations. Additional risks and
uncertainties are set forth in the Company’s reports filed with the
United States Securities and Exchange Commission, which are available at http://www.sec.gov/
as well as the Company’s web site at http://www.trinseo.com.
As a result of the foregoing considerations, you are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date of this press release. All forward-looking
statements are qualified in their entirety by this cautionary statement.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.

Note 2: Reconciliation of Non-GAAP Performance
Measures to Net income

EBITDA is a non-GAAP financial performance measure that we refer to in
making operating decisions because we believe it provides our management
as well as our investors with meaningful information regarding the
Company’s operational performance. We believe the use of EBITDA as a
metric assists our board of directors, management and investors in
comparing our operating performance on a consistent basis.

We also present Adjusted EBITDA as a non-GAAP financial performance
measure, which we define as income from continuing operations before
interest expense, net; income tax provision; depreciation and
amortization expense; loss on extinguishment of long-term debt; asset
impairment charges; gains or losses on the dispositions of businesses
and assets; restructuring; acquisition related costs and other items. In
doing so, we are providing management, investors, and credit rating
agencies with an indicator of our ongoing performance and business
trends, removing the impact of transactions and events that we would not
consider a part of our core operations.

Lastly, we present Adjusted Net Income and Adjusted EPS as additional
performance measures. Adjusted Net Income is calculated as Adjusted
EBITDA (defined beginning with net income, above), less interest
expense, less the provision for income taxes and depreciation and
amortization, tax affected for various discrete items, as appropriate.
Adjusted EPS is calculated as Adjusted Net Income per weighted average
diluted shares outstanding for a given period. We believe that Adjusted
Net Income and Adjusted EPS provide transparent and useful information
to management, investors, analysts and other stakeholders in evaluating
and assessing our operating results from period-to-period after removing
the impact of certain transactions and activities that affect
comparability and that are not considered part of our core operations.

There are limitations to using the financial performance measures noted
above. These performance measures are not intended to represent net
income or other measures of financial performance. As such, they should
not be used as alternatives to net income as indicators of operating
performance. Other companies in our industry may define these
performance measures differently than we do. As a result, it may be
difficult to use these or similarly-named financial measures that other
companies may use, to compare the performance of those companies to our
performance. We compensate for these limitations by providing
reconciliations of these performance measures to our net income, which
is determined in accordance with GAAP.

Contacts

Press contacts:
Trinseo
Donna St. Germain, +1
610-240-3307
[email protected]
or
Makovsky
Doug
Hesney, +1 212-508-9661
[email protected]
or
Investor
Contact:
Trinseo
David Stasse, +1 610-240-3207
[email protected]

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