NOTE 25—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 S.A. (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 Balance Sheets as of December 31, 2014 and December 31, 2013;

 

•

the Condensed Consolidating Statements of Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012; and

 

•

the Condensed Consolidating Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012.

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 our 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 Consolidated Financial Statements presented and other notes related thereto contained within this Annual Report.

 

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

(In thousands)

 

		December 31, 2014
		Parent Guarantor				Issuers				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Assets
Current assets
Cash and cash equivalents		$	904			$	2,653			$	166,106			$	51,123			$	—			$	220,786
Accounts receivable, net of allowance			—				62				207,465				393,539				—				601,066
Intercompany receivables			55				493,090				1,369,837				101,716				(1,964,698	)			—
Inventories			—				—				381,797				99,709				(7,645	)			473,861
Deferred income tax assets			—				—				5,382				6,404				—				11,786
Other current assets			—				148				6,476				8,540				—				15,164
Total current assets			959				495,953				2,137,063				661,031				(1,972,343	)			1,322,663
Investments in unconsolidated affiliates			—				—				167,658				—				—				167,658
Property, plant and equipment, net			—				—				426,905				129,792				—				556,697
Other assets
Goodwill			—				—				34,574				—				—				34,574
Other intangible assets, net			—				—				164,020				1,338				—				165,358
Investments in subsidiaries			327,100				1,327,675				595,755				—				(2,250,530	)			—
Intercompany notes receivable—noncurrent			—				1,323,401				15,664				—				(1,339,065	)			—
Deferred income tax assets—noncurrent			—				—				43,676				3,136				—				46,812
Deferred charges and other assets			—				36,899				23,398				718				1,339				62,354
Total other assets			327,100				2,687,975				877,087				5,192				(3,588,256	)			309,098
Total assets		$	328,059			$	3,183,928			$	3,608,713			$	796,015			$	(5,560,599	)		$	2,356,116
Liabilities and shareholders’ equity
Current liabilities
Short-term borrowings		$	—			$	—			$	—			$	7,559			$	—			$	7,559
Accounts payable			46				2,323				366,882				65,441				—				434,692
Intercompany payables			6,944				888,660				522,930				546,150				(1,964,684	)			—
Income taxes payable			—				—				8,864				549				—				9,413
Deferred income tax liabilities			—				—				1,171				242				—				1,413
Accrued expenses and other current liabilities			204				52,001				55,412				13,311				—				120,928
Total current liabilities			7,194				942,984				955,259				633,252				(1,964,684	)			574,005
Noncurrent liabilities
Long-term debt			—				1,192,500				2,148				—				—				1,194,648
Intercompany notes payable—noncurrent			—				—				1,296,121				42,944				(1,339,065	)			—
Deferred income tax liabilities—noncurrent			—				2,300				16,145				8,866				—				27,311
Other noncurrent obligations			—				—				226,708				12,579				—				239,287
Total noncurrent liabilities			—				1,194,800				1,541,122				64,389				(1,339,065	)			1,461,246
Commitments and contingencies (Note 15)
Shareholders’ equity			320,865				1,046,144				1,112,332				98,374				(2,256,850	)			320,865
Total liabilities and shareholders’ equity		$	328,059			$	3,183,928			$	3,608,713			$	796,015			$	(5,560,599	)		$	2,356,116

 

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

(In thousands)

 

		December 31, 2013
		Parent Guarantor				Issuers				Guarantor Subsidiaries				Non-Guarantor Subsidiaries				Eliminations				Consolidated
Assets
Current assets
Cash and cash equivalents		$	2			$	954			$	154,770			$	40,777			$	—			$	196,503
Accounts receivable, net of allowance			—				—				272,745				444,739				(2	)			717,482
Intercompany receivables			—				554,795				1,242,405				93,841				(1,891,041	)			—
Inventories			—				—				439,952				93,019				(2,780	)			530,191
Deferred income tax assets			—				—				5,077				4,743				—				9,820
Other current assets			—				3,954				4,386				14,410				—				22,750
Total current assets			2				559,703				2,119,335				691,529				(1,893,823	)			1,476,746
Investments in unconsolidated affiliates			—				—				155,887				—				—				155,887
Property, plant and equipment, net			—				—				476,137				130,290				—				606,427
Other assets
Goodwill			—				—				37,273				—				—				37,273
Other intangible assets, net			—				—				171,352				162				—				171,514
Investments in subsidiaries			343,429				1,232,608				615,153				—				(2,191,190	)			—
Intercompany notes receivable—noncurrent			—				1,359,637				17,739				—				(1,377,376	)			—
Deferred income tax assets—noncurrent			—				—				36,260				6,678				—				42,938
Deferred charges and other assets			—				48,801				33,607				990				598				83,996
Total other assets			343,429				2,641,046				911,384				7,830				(3,567,968	)			335,721
Total assets		$	343,431			$	3,200,749			$	3,662,743			$	829,649			$	(5,461,791	)		$	2,574,781
Liabilities and shareholder’s equity
Current liabilities
Short-term borrowings		$	—			$	3,646			$	—			$	5,108			$	—			$	8,754
Accounts payable			—				2,570				436,147				70,378				(2	)			509,093
Intercompany payables			158				763,022				550,741				576,354				(1,890,275	)			—
Income taxes payable			—				—				9,407				276				—				9,683
Deferred income tax liabilities			—				—				784				2,119				—				2,903
Accrued expenses and other current liabilities			71				58,977				66,061				11,020				—				136,129
Total current liabilities			229				828,215				1,063,140				665,255				(1,890,277	)			666,562
Noncurrent liabilities
Long-term debt			—				1,325,000				2,667				—				—				1,327,667
Intercompany notes payable—noncurrent			—				—				1,347,773				29,602				(1,377,375	)			—
Deferred income tax liabilities—noncurrent			—				1,600				17,115				8,217				—				26,932
Other noncurrent obligations			—				—				198,479				11,939				—				210,418
Total noncurrent liabilities			—				1,326,600				1,566,034				49,758				(1,377,375	)			1,565,017
Commitments and contingencies (Note 15)
Shareholder’s equity			343,202				1,045,934				1,033,569				114,636				(2,194,139	)			343,202
Total liabilities and shareholder’s equity		$	343,431			$	3,200,749			$	3,662,743			$	829,649			$	(5,461,791	)		$	2,574,781

 

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

 

		Year Ended December 31, 2014
		Parent Guarantor				Issuers				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	—			$	4,684,218			$	1,366,437			$	(922,694	)		$	5,127,961
Cost of sales			—				560				4,425,078				1,322,771				(917,769	)			4,830,640
Gross profit			—				(560	)			259,140				43,666				(4,925	)			297,321
Selling, general and administrative expenses			11,822				18,405				180,730				21,629				—				232,586
Equity in earnings of unconsolidated affiliates			—				—				47,749				—				—				47,749
Operating income (loss)			(11,822	)			(18,965	)			126,159				22,037				(4,925	)			112,484
Interest expense, net			—				120,910				1,535				2,478				—				124,923
Intercompany interest expense (income), net			12				(81,551	)			69,902				11,609				28				—
Loss on extinguishment of long-term debt			—				7,390				—				—				—				7,390
Other expense (income), net			6,330				17,742				(3,323	)			7,052				(17	)			27,784
Equity in loss (earnings) of subsidiaries			49,132				(59,281	)			32,878				—				(22,729	)			—
Income (loss) before income taxes			(67,296	)			(24,175	)			25,167				898				17,793				(47,613	)
Provision for (benefit from) income taxes			36				1,409				15,004				4,011				(741	)			19,719
Net income (loss)		$	(67,332	)		$	(25,584	)		$	10,163			$	(3,113	)		$	18,534			$	(67,332	)
Comprehensive income (loss)		$	(230,927	)		$	(189,179	)		$	(150,388	)		$	(6,157	)		$	345,724			$	(230,927	)

 

		Year Ended December 31, 2013
		Parent Guarantor				Issuers				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	—			$	4,793,183			$	1,476,538			$	(962,307	)		$	5,307,414
Cost of sales			—				996				4,485,470				1,427,391				(964,453	)			4,949,404
Gross profit			—				(996	)			307,713				49,147				2,146				358,010
Selling, general and administrative expenses			10,073				3,981				181,756				21,048				—				216,858
Equity in earnings of unconsolidated affiliates			—				—				39,138				—				—				39,138
Operating income (loss)			(10,073	)			(4,977	)			165,095				28,099				2,146				180,290
Interest expense, net			—				125,711				3,656				2,671				—				132,038
Intercompany interest expense (income), net			7				(88,851	)			76,042				12,803				(1	)			—
Loss on extinguishment of long-term debt			—				20,744				—				—				—				20,744
Other expense (income), net			6				(32,325	)			39,534				20,647				15				27,877
Equity in loss (earnings) of subsidiaries			12,128				(44,373	)			(3,346	)			—				35,591				—
Income (loss) before income taxes			(22,214	)			14,117				49,209				(8,022	)			(33,459	)			(369	)
Provision for (benefit from) income taxes			4				1,735				16,964				2,593				553				21,849
Net income (loss)		$	(22,218	)		$	12,382			$	32,245			$	(10,615	)		$	(34,012	)		$	(22,218	)
Comprehensive income (loss)		$	41,587			$	76,187			$	91,240			$	(5,805	)		$	(161,622	)		$	41,587

 

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

 

		Year Ended December 31, 2012
		Parent Guarantor				Issuers				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	—			$	4,947,970			$	1,613,401			$	(1,109,462	)		$	5,451,909
Cost of sales			—				279				4,691,834				1,532,264				(1,109,189	)			5,115,188
Gross profit			—				(279	)			256,136				81,137				(273	)			336,721
Selling, general and administrative expenses			7,374				3,994				147,454				23,247				—				182,069
Equity in earnings of unconsolidated affiliates			—				—				27,140				—				—				27,140
Operating income (loss)			(7,374	)			(4,273	)			135,822				57,890				(273	)			181,792
Interest expense, net			—				104,069				917				4,985				—				109,971
Intercompany interest expense (income), net			1				(88,245	)			76,510				11,782				(48	)			—
Other expense (income), net			4				(20,515	)			21,376				23,125				(11	)			23,979
Equity in loss (earnings) of subsidiaries			(37,661	)			(53,200	)			(75,950	)			—				166,811				—
Income (loss) before income taxes			30,282				53,618				112,969				17,998				(167,025	)			47,842
Provision for (benefit from) income taxes			—				(808	)			22,159				(3,739	)			(52	)			17,560
Net income (loss)		$	30,282			$	54,426			$	90,810			$	21,737			$	(166,973	)		$	30,282
Comprehensive income (loss)		$	1,667			$	25,811			$	59,111			$	24,821			$	(109,743	)		$	1,667

 

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

 

		Year Ended December 31, 2014
		Parent Guarantor				Issuers				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Eliminations				Consolidated
Cash flows from operating activities
Cash provided by (used in) operating activities		$	(1,079	)		$	(58,667	)		$	107,137			$	81,641			$	(11,811	)		$	117,221
Cash flows from investing activities
Capital expenditures			—				—				(85,021	)			(13,585	)			—				(98,606	)
Proceeds from the sale of businesses and other assets			—				—				—				6,257				—				6,257
Payment for working capital adjustment from sale of business			—				—				(700	)			—				—				(700	)
Distributions from unconsolidated affiliates			—				—				978				—				—				978
Investments in subsidiaries			(196,400	)			(199,400	)			(196,626	)			—				592,426				—
Intercompany investing activities			—				2,462				(181,036	)			—				178,574				—
(Increase) / decrease in restricted cash			—				—				(533	)			—				—				(533	)
Cash provided by (used in) investing activities			(196,400	)			(196,938	)			(462,938	)			(7,328	)			771,000				(92,604	)
Cash flows from financing activities
Proceeds from initial public offering, net of offering costs			198,087				—				—				—				—				198,087
Intercompany short-term borrowings, net			295				14,254				(34,986	)			(927	)			21,364				—
Short-term borrowings, net			—				(3,646	)			(273	)			(52,982	)			—				(56,901	)
Contributions from parent companies			—				189,400				395,800				7,226				(592,426	)			—
Distributions to parent companies			—				—				—				(11,811	)			11,811				—
Repayments of Senior Notes			—				(132,500	)			—				—				—				(132,500	)
Proceeds from (repayments of) intercompany long-term debt			—				189,400				13,000				(2,462	)			(199,938	)			—
Proceeds from Accounts Receivable Securitization Facility			—				—				—				308,638				—				308,638
Repayments of Accounts Receivable Securitization Facility			—				—				—				(309,205	)			—				(309,205	)
Cash provided by (used in) financing activities			198,382				256,908				373,541				(61,523	)			(759,189	)			8,119
Effect of exchange rates on cash			(1	)			396				(6,404	)			(2,444	)			—				(8,453	)
Net change in cash and cash equivalents			902				1,699				11,336				10,346				—				24,283
Cash and cash equivalents—beginning of period			2				954				154,770				40,777				—				196,503
Cash and cash equivalents—end of period		$	904			$	2,653			$	166,106			$	51,123			$	—			$	220,786

 

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

 

		Year Ended December 31, 2013
		Parent Guarantor				Issuers				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Eliminations				Consolidated
Cash flows from operating activities
Cash provided by (used in) operating activities		$	(78	)		$	27,101			$	34,470			$	149,842			$	—			$	211,335
Cash flows from investing activities
Capital expenditures			—				—				(61,573	)			(11,971	)			—				(73,544	)
Proceeds from capital expenditures subsidy			—				—				18,769				—				—				18,769
Proceeds from the sale of businesses and assets			—				—				15,221				—				—				15,221
Advance payment refunded			—				—				—				(2,711	)			—				(2,711	)
Distributions from unconsolidated affiliates			—				—				1,055				—				—				1,055
Intercompany investing activities			—				(4,000	)			(43,012	)			—				47,012				—
Decrease in restricted cash			—				—				—				7,852				—				7,852
Cash provided by (used in) investing activities			—				(4,000	)			(69,540	)			(6,830	)			47,012				(33,358	)
Cash flows from financing activities
Deferred financing fees			—				(47,488	)			(767	)			—				—				(48,255	)
Intercompany short-term borrowings, net			77				37,793				5,991				(849	)			(43,012	)			—
Short-term borrowings, net			—				(7,727	)			(267	)			(34,883	)			—				(42,877	)
Proceeds from issuance of intercompany long-term debt			—				—				—				4,000				(4,000	)			—
Repayments of Term Loans			—				(1,239,000	)			—				—				—				(1,239,000	)
Proceeds from issuance of Senior Notes			—				1,325,000				—				—				—				1,325,000
Proceeds from issuance of Accounts Receivable Securitization Facility			—				—				—				376,630				—				376,630
Repayments of Accounts Receivable Securitization Facility			—				—				—				(471,696	)			—				(471,696	)
Proceeds from the draw of revolving debt			—				405,000				—				—				—				405,000
Repayments on the revolving debt			—				(525,000	)			—				—				—				(525,000	)
Cash provided by (used in) financing activities			77				(51,422	)			4,957				(126,798	)			(47,012	)			(220,198	)
Effect of exchange rates on cash			—				(136	)			2,795				(292	)			—				2,367
Net change in cash and cash equivalents			(1	)			(28,457	)			(27,318	)			15,922				—				(39,854	)
Cash and cash equivalents—beginning of period			3				29,411				182,088				24,855				—				236,357
Cash and cash equivalents—end of period		$	2			$	954			$	154,770			$	40,777			$	—			$	196,503

 

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

(In thousands)

 

		Year Ended December 31, 2012
		Parent Guarantor				Issuers				Guarantor Subsidiaries				Non- Guarantor Subsidiaries				Eliminations				Consolidated
Cash flows from operating activities
Cash provided by (used in) operating activities		$	(48	)		$	7,865			$	113,446			$	64,852			$	—			$	186,115
Cash flows from investing activities
Capital expenditures			—				—				(110,746	)			(7,758	)			—				(118,504	)
Proceeds from capital expenditures subsidy			—				—				6,079				—				—				6,079
Proceeds from the sale of property, plant and equipment			—				—				206				47				—				253
Advance payment received			—				—				—				2,602				—				2,602
Investments in subsidiaries			(162,155	)			—				(22,155	)			—				184,310				—
Intercompany investing activities			—				144,463				68,268				—				(212,731	)			—
Increase in restricted cash			—				—				—				(7,725	)			—				(7,725	)
Cash provided by (used in) investing activities			(162,155	)			144,463				(58,348	)			(12,834	)			(28,421	)			(117,295	)
Cash flows from financing activities
Deferred financing fees			—				(7,392	)			(688	)			—				—				(8,080	)
Intercompany short-term borrowings, net			51				(49,818	)			1,444				(18,625	)			66,948				—
Short-term borrowings, net			—				(4,159	)			(407	)			(33,321	)			—				(37,887	)
Contributions from parent companies			—				22,155				162,155				—				(184,310	)			—
Capital contributions from shareholder			162,155				—				—				—				—				162,155
Repayments of intercompany indebtedness			—				—				(144,183	)			(1,600	)			145,783				—
Repayments of Term Loans			—				(147,000	)			—				—				—				(147,000	)
Proceeds from issuance of Accounts Receivable Securitization Facility			—				—				—				113,828				—				113,828
Repayments of Accounts Receivable Securitization Facility			—				—				—				(130,233	)			—				(130,233	)
Proceeds from the draw of revolving debt			—				1,105,000				—				—				—				1,105,000
Repayments on the revolving debt			—				(1,135,000	)			—				—				—				(1,135,000	)
Cash provided by (used in) financing activities			162,206				(216,214	)			18,321				(69,951	)			28,421				(77,217	)
Effect of exchange rates on cash			—				16				246				(821	)			—				(559	)
Net change in cash and cash equivalents			3				(63,870	)			73,665				(18,754	)			—				(8,956	)
Cash and cash equivalents—beginning of period			—				93,281				108,423				43,609				—				245,313
Cash and cash equivalents—end of period		$	3			$	29,411			$	182,088			$	24,855			$	—			$	236,357