Chris Pappas - CEO John Feenan - CFO David Stasse - IR.

David Begleiter - Deutsche Bank Frank Mitsch - Wells Fargo Securities Hassan Ahmed - Alembic Global Dan Rizzo - Jefferies Ryan Berney - Goldman Sachs Matt Andrejkovics - Morgan Stanley Eric Petrie - Citigroup.

Good morning ladies and gentlemen, and welcome to the Trinseo Third Quarter 2015 Financial Results Conference Call.

Turning to Slide 2, we welcome the Trinseo management team; Chris Pappas, President and CEO; John Feenan, Executive Vice President and CFO; and David Stasse, Vice President of Treasury and Investor Relations; who will be conducting the call. I will now hand the call over to David Stasse..

Thank you, Roland, and good morning, everyone. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time.

[Operator Instructions] The slide presentation for today's call has been posted on the company's Investor Relations website, in the webcast viewer, and with the financial results press release by means of a Form 8-K filing with the 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 November 5, 2016. Our disclosure rules and cautionary note on forward-looking statements are noted on Slide 2.

During this presentation, we may make certain forward looking statements including issuing guidance and describing our future expectations. We must caution you that actual results could differ materially from what is described or implied in these statements.

Factors that could cause actual results to differ include, but are not limited to factors set forth in our Annual Report on Form K under the item 1A Risk Factors. I will now hand the call over to Chris Pappas..

Thank you, Dave. Good morning and thank you for joining us to discuss our third quarter 2015 financial results. Before we get into the details of the quarter I want to provide some important clarification on our results for the third quarter as well as our full year 2015 guidance.

As you know we regularly report our adjusted EBITDA and EPS as well as the inventory revaluation impact at the consolidated and division levels. Some quarters the inventory revaluation impact is minimal.

So, we do not specifically address it, other times it is significant and it is important to understand how it relates to the underlying business performance in a given quarter or period. The third quarter is one of those instances where inventory revaluation is significant.

Third quarter adjusted EBITDA of $116 million included an unfavorable $28 million of inventory revaluation impact, excluding this impact adjusted EBITDA was very strong at $144 million. We also reported a $1.07 adjusted earnings per share which was negatively impacted by approximately $0.40 related to the inventory revaluation.

Excluding inventory revaluation impacts, Trinseo beat both EBITDA and EPS expectations for the third quarter. Due to this very strong third quarter performance we are increasing our full year outlook for adjusted EBITDA excluding inventory revaluation to between $525 million and $535 million which is above our previous full year guidance.

Now, I would like to highlight important recent executive leadership announcements which will adapt to the Trinseo executive team. First, Martin Pugh has been named Executive Vice President and Chief Operating Officer, reporting to me.

In this newly created interim role, Martin will elevate his focus on various key business initiatives, including our supply chain structural changes, our new ERP system installation, as well as stocks compliance. He will also partner with the new Business Presidents on key strategic business initiatives across the company.

In addition two new executives joined Trinseo on November 1st. Tim Stedman was named Senior Vice President and Business President of Basic Plastics and Feedstock's. Tim was most recently business Director, Basic Chemicals at ExxonMobil Chemical.

Also Hayati Yarkadas has joined the company as Senior Vice President and Business President of the Performance Materials division. Hayati was most recently Senior Vice President and General Manager, Europe, for Tate and Lyle. Both Tim and Hayati report to Martin and will be part of our Executive Leadership Team.

As Trinseo matures to public company these moves are consistent with our continued emphasis on results and business focus. Not, let's turn to Slide 3, Trinseo had a great start to 2015 with a strong first half and we are pleased to announce the continuation of these strong results in the third quarter.

Adjusted EBITDA for the quarter was $116 million which included a negative inventory revaluation impact of $28 million, driven by the decreasing price of benzene during the quarter.

Adjusted EBITDA excluding inventory revaluation of $144 million in the third quarter was our second highest ever just behind the record $151 million from the first quarter of this year. In addition we had very strong free cash flow of $95 million. Now, let's look at the results at the division and segment levels.

The Performance Materials division had adjusted EBITDA of 66 million including an unfavorable inventory revaluation impact of 6 million, so $72 million excluding inventory revaluation. This is in line with the $70 million to $75 million that we discussed during last quarter's call.

At the segment level latex had $24 million of adjusted EBITDA on 307 million pounds of volume, which are in line with historical trend for this segment. During our last call I mentioned we're actively studying ways to improve our performance in our latex business.

In the third quarter we took action towards this goal in two ways, first we implemented cost-reduction measures including a reduction in asset footprint with the closure of our Styrene Butadiene latex plant in Gales Ferry, Connecticut.

This decision was in response to continuing decline in the coated paper industry in North America and as part of a program which we believe will reduce cost in the latex business by $5 million as a run rate in 2016.

Second we announced the price increase of $0.10 per dry [ph] pound for latex sold into carpet, paper and performance latex markets in North America. We believe these actions will improve our margins in latex and enable us to continue to invest in innovative and cost competitive products.

Now moving to Synthetic Rubber, adjusted EBITDA for the quarter was $27 million, right in line with expectations and higher than the second quarter when we experienced significant impacts from the planned rubber maintenance event. Third quarter sales volume of 152 million pounds was very strong increasing 11% versus prior year.

Our most advance rubber grades, enhanced SSBR which are used exclusively in high performance tires again sold in record volume. This product line continues to be become a bigger piece of our overall sales mix and as the high performance tire market grows at several times the rate of the overall tire market we expect this trend to continue.

Now moving to Performance Plastics, adjusted EBITDA for the quarter was $50 million. This was lower than recent quarters due mainly to higher polycarbonate cost and lag pricing.

Third quarter sales volume was roughly flat versus prior year as growth in North America and Europe was offset by declines in Asia and Latin America mostly due to the automotive market and regional economic conditions.

Moving to our Basic Plastics & Feedstocks division, we had adjusted EBITDA of $70 million for the quarter or $93 million excluding inventory revaluation. These results included $33 million of equity affiliate income nearly all from Americas Styrenics.

We continue to be encourage by our performance in Basic Plastics & Feedstocks as it is further evidence of the structural supply demand improvement that are driving higher margins in styrene monomer, polystyrene and polycarbonate.

In fact this is the third straight quarter with adjusted EBITDA higher than all of last year in this division, a clear step change. During the second quarter call, our view was that third quarter styrene margins in Europe would decrease from the very strong second quarter by about $125 per metric ton.

However, styrene supply demand dynamics were tighter than expected due to planned and unplanned outages and this resulted in elevated styrene margins throughout the quarter. Global styrenic polymers volume was lower in the third quarter primarily in China due to weak demand and continuation of customer destocking in anticipation of lower prices.

We are already seeing restocking in the fourth quarter as polystyrene prices have fallen with the drop in styrene. Moving to polycarbonate, as expected margins in third quarter increased from the second quarter by about $250 per metric ton.

Demand continues to be strong, polycarbonate volume in the third quarter was up 8% versus prior year and global operating rates for 2015 are estimated now to be in excess of 80%.

Equity affiliate income from the Americas Styrenics decreased from the record second quarter performance which was driven by very tight styrene market in U.S., but their results were still very strong and in line with a higher run rate we’ve seen earlier this year.

Now I’d like to turn the call over to John for more detail review of our financial results at a consolidated and segment level..

Thanks Chris and good morning. As you heard in Chris’ opening comments we followed up the solid results from the first-half of the year with another very strong quarter. Third quarter volume of 1.3 billion pounds was in line with prior year and prior quarter.

Adjusted EBITDA of $116 million and adjusted earnings per share of a $1.07 were very strong results for the company. On an LTM basis, adjusted EBITDA of 409 million and adjusted EBITDA excluding inventory revaluation of 522 million were both records which we believe reflects a sustained step change in the profitability of the company.

Please note that the third quarter adjusted net income reflected the full effect of the interest savings from our recent refinancing. Our run rate of interest expense going forward, will be about $20 million per quarter.

Now turning to Slide 6, the latex segment revenue of 255 million for the quarter decreased about 22% versus prior year driven by the pass through of lower raw material cost and also currency. Adjusted EBITDA of 24 million was 2 million below prior year due primarily to currency.

As Chris mentioned earlier, we’ve taken cost actions in latex that we believe will reduce costs by approximately $5 million per year. We anticipate that we will begin to see the impact of this in the first quarter of 2016, realizing the full run rate by the end of 2016.

Now, turning to Slide 7, in Synthetic Rubber revenue decreased 19% versus prior year driven by the pass-through of lower raw material costs, as well as currency. Higher sales volume increased revenue by 13%, driven by SSBR. Adjusted EBITDA of $27 million was equal to prior year as higher SSBR volume was offset by currency and modest margin reduction.

Trinseo's rubber performance returned to a more normalized run rate after the turnaround affect in the second quarter of 2015. Now turning to Slide 8, Performance Plastics revenue of 180 million for the quarter was 13% below prior year, driven by the pass-through of lower raw material costs, as well as currency.

Adjusted EBITDA of 15 million was 4 million below prior year due mostly to inventory revaluation. Volumes were flat versus prior year as growth in North America in the European auto markets were offset by weakness in Brazil and China.

Now turning to Slide 9, Basic Plastics & Feedstock's revenue of 467 million was 24% below prior year driven by currency and raw material pass-through. Adjusted EBITDA of 70 million was 66 million higher than prior year.

Adjusted EBITDA excluding inventory revaluation of 93 million was 89 million higher than prior year driven by higher styrene margin, higher equity affiliate income from America Styrenics as well as from the restructuring savings and higher margins in polycarbonate. Now let's turn to Slide 10 for the discussion on cash and liquidity.

Free cash flow for the quarter was 95 million inclusive of a record 42.5 million dividend from America Styrenics, 35 million of capital expenditures and 10 million of cash interest. At the end of the quarter we had solid liquidity of 787 million which included 321 million of cash.

For 2015 we now expect CapEx of about 110 million in cash taxes of approximately 55 million. Our net leverage continued to decrease due to higher EBITDA and cash generation and was 2.2 times at the end of the third quarter.

We believe our net leverage will be below two times by the end of year, compared to approximately four times at the end of both 2013 and 2014. With that I'll now turn the call back to Chris..

Thanks John. Now I'd like to discuss performance expectations for the fourth quarter. Please turn to Slide 12 for discussion on styrene monomer. We presented these styrene margin charts before and they’ve been update through recent actual data, as well as the outlook for the remainder of the year.

Let's first look at the chart on the top which shows Western Europe margin data. As expected October margins declined significantly from the very high September level as outages ended and imports arrived from North America. We expect the fourth quarter margins to decline by about $175 per ton in comparison to the third quarter.

But restocking of polystyrene as well as Europe styrene exports to Asia should result in a more balanced market as we approach year-end.

Moving to the lower chart on Slide 12 which shows Asia styrene margin data, you can see that the fourth quarter margin is expected to decrease by about $75 per ton from the third quarter levels as more supply has come back online.

Looking at the fourth quarter in total we expect styrene margins to decrease EBITDA, excluding inventory revaluation by about $25 million from the third quarter. Thinking about inventory revaluation for the fourth quarter as previously discussed, this impact is driven largely by the cost of benzene, ethylene and butadiene.

You can see from these charts that benzene costs are expected to be slightly up during the quarter. Butadiene in Europe is forecasted to be slightly down. Therefore at this time we expect a minimal inventory revaluation impact in the fourth quarter.

So with that backdrop for styrene margins and inventory revaluation let's move to Slide 13 to discuss our view of the fourth quarter. First we expect Performance Materials division results to continue its run rate of $70 million to $75 million of adjusted EBITDA per quarter.

Latex adjusted EBITDA is expected to be approximately $20 million and we continue to be diligent in our actions to improve the performance for this business with the recent price increase announcements as well as the implementation of cost saving initiatives.

Synthetic Rubber is expected to be similar to the third quarter at approximately $25 million of adjusted EBITDA. We believe Performance Plastics will improve as margins increase due to the reversal of price lag effects. Our fourth quarter adjusted EBITDA forecast is $25 million to $30 million for this segment.

Now moving to Basic Plastics & Feedstocks, we believe the fourth quarter will be between $55 million and $65 million of adjusted EBITDA. This is a decrease of about $30 million from the $93 million of adjusted EBITDA excluding inventory revaluation in the third quarter.

This change is driven by lower styrene margins as discussed in Europe and Asia as well as from lower expected income from Americas Styrenics due to lower styrene margins in the U.S. We expect polycarbonate margins to be flat from quarter-to-quarter with sales volumes down slightly due to seasonality.

Corporate expense should be about 20 million for the quarter consistent with recent levels. In total, we expect to have another strong quarter delivering between 110 and 120 of adjusted EBITDA.

This would result in a record full year adjusted EBITDA of $485 million to $495 million and a record adjusted EPS of $4.50 to $4.70 per share for the full year. Both of these forecasts include an estimated unfavorable impact from inventory revaluation of about $40 million for 2015.

Excluding this impact, we expect to be between 525 million and 535 million of adjusted EBITDA for the year, which is above our previous full year guidance.

In addition along with this strong EBITDA and EPS performance, we expect to generate full year free cash flow of between $270 million and $290 million excluding the $69 million cloth [ph] premium related to our refinancing earlier in the year. Cash generation and net leverage are becoming a significant part of Trinseo’s value proposition.

As John mentioned, our net leverage at the end of the year is expected to be below two times. Let's look at Slide 14 for expectation for 2016. We continue to see adjusted EBITDA in 2016 similar to this year’s level of $485 million to $495 million. Let me take a minute to explain our 2016 expectations for each division.

We expect that we’ll be able to grow adjusted EBITDA in Performance Materials by 5% in 2016; in latex, we anticipate sequentially higher EBITDA as our cost actions are implemented and price increases take effect. We believe Rubber EBITDA will improve as we have no significant turnaround in 2016 and we continue to have a positive shift in product mix.

In Performance Plastics, we expect to have modest EBITDA growth on incrementally higher sales volume. Now let's move to Basic Plastics & Feedstocks, before talking about next year’s EBITDA expectations, I want to frame for you how we see the styrene market in 2016.

As we discussed, styrene margins were at elevated levels in the second and third quarter this year due to planned and unplanned supply outages. While difficult to quantify, we see amount of offline capacity due to planned outages being lower next year compared to this year. And of course we cannot forecast unplanned outages.

As far as supply, a facility in Netherlands has been offline for over a year is due to comeback online late this year or early next year. That facility has nameplate capacity of 550 kilo tons or about 1.6% of global supply.

In addition, there are two small plants that we believe will come online in China in the second half of the year and at least one plant that will close in Japan during the year. The sum of these is a net increase of about 1% of global supply during the calendar year.

For demand, we and others believe that this will grow about 2% next year consistent with recent trends.

So if you assess the expected year-over-year changes in supply demand for global styrene monomer, we believe 2016 in general looks like a continuation of the thesis we have been describing, limited incremental capacity, generally [indiscernible] operating rate and age [ph] assets around the globe.

Having said that, our $485 million to $495 million projection for 2016 include lower styrene monomer both at Trinseo and Americas Styrenics in comparison to 2015.

However, if we experience a period of elevated styrene margin like we have had in each of the past three years, we believe there is upside to our forecasted 485 million to 495 million of adjusted EBITDA in 2016. In each of the last three years we had a margin spike that on average lasted three months and increased EBITDA by about $40 million.

Moving to polycarbonate, we expect another solid year as the market continues to tighten. At $485 million to $495 million of adjusted EBITDA, we expect adjusted EPS of $4.80 to $5 per share. We will also continue to be very cash generative.

For your modeling purposes you should assumed $75 million of cash interest, $80 million of cash taxes and about $150 million of capital spending in 2016. In closing I am very pleased with our performance for the first three quarters of 2015. As we continue to deliver very strong EBITDA and free cash flow.

We're well on our way to a record year in EBITDA, EPS and cash flow. We continue to improve our net leverage and I believe we have Trinseo in its position ever to continue to deliver excellent results going forward. And Rolland, we can open up the phone lines for questions..

Thank you. [Operator Instructions] Our first question comes from the line of David Begleiter with Deutsche Bank.

Your line is now open, your question please?.

Chris if you could look out in styrene maybe beyond '16 into '17, '18, when do you think you might get pricing power in this chain?.

Global operating rates in styrene are generally around 85%, 86% at this stage and we recall that's a kind of steady state without significant outages. So 91%, 92% steady state would be a very nice place to be. We would need to a delta of demand to capacity growth of a couple of percent per year over two to three years.

There is no capacity coming beyond the period I mentioned other than the restart of the plants in the Netherlands and the potential for a couple of small plants in China.

So the supply side looks pretty flat, it'll depend a little bit on the demand side and I think the other thing to realize David is we have a very old asset base in this business around the globe.

And while it's hard to predict that old asset base has had at least in the last three years a propensity to have issues and those margin spikes could continue in the future and by '17, '18 they might be a big part of the story on a more continuous basis..

And just on synthetic rubber, Chris looking at '16, you discussed some of the potential upside to your guide you just gave of I guess up, modestly or up year-over-year?.

Well we're more or less sold out in Synthetic Rubber at this point in the company. We've more or less moved through the capacity rights that we took on a year or so ago.

Our improvement in EBITDA in asset -- in rubber next year is going to come from a couple of things, one we have no planned outages, you'll recall this year we had a significant planned outage in our rubber business in the second quarter.

And that was at least $5 million worth of EBITDA impact, so we'll have that going for us, we're going to have continued mix improvement and depending on how the other polymers work the SBR, nickel and lithium, if they start to move up in margin we could have contribution from them as well into the overall rubber EBITDA equation David..

Thank you. Our next question comes from the line of Frank Mitsch with Wells Fargo Security.

Your line is now open, your question please?.

Good morning Chris, and congrats on a continuation of a good year-to-date, I was just thinking that you guys might be at Harvard business review case study of a company actually meeting and exceeding its financial targets out of the IPO box, so congrats on possibly, I mean a future there.

As I look at your net debt to EBITDA below 2x, what does that start to do in terms of your ability and your usage of cash as we look into '16 and beyond because I would imagine that this starts to tick various boxes that's frees you folks up?.

Well, I'll turn it over to John, but you're right on the mark Frank, not so much about the Harvard thing.

I'll turn it John, but we're going to -- we are in fact generating a lot of cash which is clearly a great thing for the company and of course that give us some optionality, but John what do you think about some of the options we might have with cash?.

I would look at it as three potential items, first, we would probably initiate a dividend in the form of peers in our industry somewhere in the range of 1% to 2%. I could see that happening sometime in 2016.

We want to continue to invest where we’re getting obviously the highest returns, as a prudent capital allocation decision and so that would be focused for us in our performance materials division. And the third piece is that we would potentially look at continuing to de-lever and pay down debt.

So in that order that’s where we would focus on the continued cash you should -- cash build that we have..

And you are stepping up CapEx in ’16 relative to where you’ve been.

What are some of the major projects that you’ll be targeting?.

Let me go back for a minutes, first, before we’ve said that we would be roughly 125 and 135 in ’15 and ’16 for a total of approximately 260, there is some timing issues in there.

We’ll do about 110 this year and about 150 next year, the breakout of that 150 is continued 35 million to 40 million of what we classify as maintenance EH&S and regulatory issues.

We have some increases that we had alluded in previous calls around our shop floor and our ERP implementation that goes from roughly 25 million to around 55 million in ’15 and then it will tail off after that.

Then we have about 30 million earmarked for various growth initiatives mainly ZJG [ph] which we’ve done this year and our neodymium conversion in rubber. And then we have approximately 20 million of miscellaneous items that are all focused around productivity and efficiency. So that’s a quick bridge from ’15 to ’16..

Frank, I think part of the story as John said is largely just a shift in timing over two years. So that’s really the key takeaway, 260 over two years, just a little shift in timing..

And then lastly just to get a little more granular on the latex side, you’ve talked about 10% price increase announcement that you folks have put out there.

What has been the competitive response and how should we be thinking about the realization of that?.

Frank it's $0.10 per pound, it's in North America and it's across all of our product line in North America and it's little bit early to tell in terms of competitive response.

We clearly have a view at Trinseo that the latex business had some challenges, we’ve been able to fight off those challenges reasonably effectively around the world as we execute our strategy. But from our point of view there is value asset there. The operating rats in the U.S.

are now up, our operating rates are about 85 or so percent after the closure of our facility in Allyn’s Point. So our operating rates are up and we think the market is ready for a price increase and our innovation and cost require it quite frankly. So that’s our point of view on it..

Thank you. Our next question comes from the line of Hassan Ahmed with Alembic Global. Your line is open. Your question please..

Chris just wanted to dig a bit deeper into the polycarbonate side of things. Obviously you talked about some improvements over there, I mean could you just maybe talk a bit about on a year-over-year basis.

As you look at call it a nine months this year and compare them to the nine months in the previous year, how much of an EBITDA sort of improvement have you seen in that business? I mean I am just trying to get a sense of what sort of restructuring benefits you guys are getting, let's say sort of just overall in the market margin improvement?.

Hassan, so you know we had a $35 million structural improvement that we put in place in the business that a part of which took effect in the fourth quarter of last year, the closure of those facility in Freeport, Texas, that was a $20 million annual cost improvement.

And then we had about $15 million or so of structural improvement that took place the first of 15 around certain contracts and purchase arrangements and so on. So that’s clearly contributory to the improvement year-over-year.

We’ve also had a very large improvement in margin due to higher operating rates and so we talked about $150 a ton of improvement in Q2, we just mentioned $250 a ton of improvement in Q3 from Q2.

And so I think when you think about our 150 KT of capacity you can calculate maybe the timing of those margin improvements and think about that plus structure and get to a reasonable number in terms of year-over-year improvement. And of course we started from a very well starting point.

Now while you're on the subject, we commented that next year we think polycarbon is going to remain in a pretty good spot, we’ll have to see how the supply demand dynamics work out, but they certainly look like they're continuing to tighten into 2016..

And as a follow-on, simplistic one, you guys talked about the inventory revaluation being around $28 million EBITDA hit, so roughly say to assume it's around $0.40 EPS wise?.

Correct..

Thank you. Our next question comes from the line of Laurence Alexander with Jefferies. Your line is open..

Hi, guys this is Dan Rizzo for Laurence. You mentioned some weakness in the Latin American and Chinese oil markets, some other company has indicated that, well a weakened third quarter but it seems kind of life in China in the first parts of the fourth quarter here.

Are you guys seeing something similar?.

We are seeing something similar in the fourth quarter Dan in China, but we continue to see weak markets in Latin America. Wide open markets..

And then with the cause actually you've taken in latex, is there anymore actions you think you could or will take towards the end of the year in 2016, what do you think what's being done within the industry and within your plan closure, is enough for now?.

We are in constant relentless focus on driving our latex business to a continuous probability of the kind of rates we've had. Our volumes have held up, we've had 10 or more quarters of approximately £3 million of volume.

So we've been able to globally maintain our volume, we do that by focusing on certain segments, board especially latex, China as a geography, we've been able to deliver cost-effective new technologies that has allowed us to hold on the volume and improve margins and we have also been reducing costs and we will continue to look at 2016 for places to reduce costs in latex.

And as I mentioned earlier that operating rates in the U.S. now for us in the mid-80s, we're also announcing a price increase across the board of $0.10 per pound..

Operating rates in the mid-80s -- is that kind of where you want to be or is it -- I mean is getting up like 90 or above 90 not really beneficial? Or I mean is there….

It would -- of course higher its beneficial Dan, but in the latex business those kinds of operating rates are effectively quite high, because latex is a batch process that has a lot of products, a lot of SKUs and it's not easy to run too much above the high 80s if you will in operating rate.

So those are healthy operating rates and that's why we think of price increase is appropriate at this time in that business..

Thank you. Our next question comes from the line of Bob Koort with Goldman Sachs.

Your line is open, your question please?.

This is Ryan Berney on for Bob.

I was hoping you could give me, maybe a little bit of a bridge, the kind of way I'm thinking about it for as a basic plastics piece specifically, sounds like this year is a rough 40 million headwind, based on kind of your 4Q guidance for the revalue, maybe another 30 million or so, this year that polycarbonate margins hold steady in the next year will be a benefit for you considering it was fairly weak relative to today in the first half.

And then maybe there's also a bit of a turnaround and destock impact, so I was hoping maybe you could kind of size all those pieces for me, so I can get a sense for kind of again what that might look like in 2016?.

So, you're asking about 2016 Ryan, and here's the way I think you ought to think about without getting necessarily true granular at the moment. In the fourth quarter we just guided to $110 million to $120 million of adjusted EBITDA, we'll pick the midpoint, a 115.

If the company runs at that rate for all of '16, my math says that's about $460 million of adjusted EBITDA. We already said that we expect our performance materials business to be 5% higher year-over-year in EBITDA for the year, and so you can do the calculation on that.

Also, embedded in that $115 million midpoint, you'll notice from the styrene chart that the styrene margins are much lower in the fourth quarter of this year for the reasons I mentioned than they have been in the prior couple of quarters.

So, clearly if the styrene margins next year move above the rate that's shown on that chart in the fourth quarter of this year, that should equate to EBITDA above that $115 million per quarter.

And that was really related to my comment earlier about, we had three years in a row of periods where the styrene margins have moved up somewhat dramatically for three months to four months and on average those styrene margin spikes if you will, over the last three years, in each of the last three years have been about $40 million each of incremental EBITDA.

And I think that's kind of the way you ought to think about 2016 off of our fourth quarter run rate.

Okay?.

And maybe you could also comment about kind of what you're seeing from a trade full perspective? I mean certainly I think there is probably some concern about some kind of weakened market demand, particularly in Asia.

So from what you're seeing do you expect maybe perhaps more exports out of Asia and if you were to see them kind of how do you input that in your calculation?.

You're speaking styrene still I assume, right? So there have been and we think trade flows from Asia of styrene are the other ways. Styrene is going to be flowing into Asia, particularly China, that region of world is short styrene, it's going to continually short and is a major importer.

There have been trade flows as you can imagine in this late second quarter, third quarter from the United States of styrene into Europe and for obvious reasons with the elevated margins of styrene and the relatively lower cost base the export opportunity was pretty high and that is now adding into the fourth quarter and it was one of the reasons why we saw the margins in Europe drop in the fourth quarter, because the styrene shipments from U.S.

were showing up in Europe. And as I said that is now adding as we move through the balance of fourth quarter. So the trade flow dynamics I don’t think are shifting, the Americas tends to be an exporter and they tend to export in Europe and Asia, Asia is a clear importer. The demand in Asia and styrene is important, we’ve said this many times.

China itself consumes about 30% of the styrene of the globe and greater Asia about 60%. But remember that consumption is not necessarily in products that are used in the country, often that consumption is converted into an item that is sent out of the country.

For example, an appliance polystyrene lining and refrigerator would be a great example of styrene consumed in China that comes out of the country as a finished good. So that’s kind of the nature of I think the context which you're thinking about on both demand and trade flows..

Thank you. Our next question comes from the line of Vincent Andrews of Morgan Stanley. Please go ahead..

Good morning. This is actually Matt Andrejkovics calling in, thanks for taking the call. Just to revisit polycarbonate just for a sec, at a recent conference you guys had mentioned that the demand growth for polycarbonate was lowered in the 3% range and has returned to historic normal growth of 5%.

If you could add some color on as to what caused it to lower in the first place? And then also why do you think it should return to the historic norm, year-to-date growth of about 8% that you've seen, and some of that maybe some pent up demand that’s driving some of the higher operating rates you're seeing. Thanks..

Thanks Matt. So the lower growth rate you're talking about for polycarbonate was occurring in the 2011 by general global economic slowdown, whether that was Europe or otherwise, across the myriad of end users that polycarbonate goes into.

As the global economic growth rate started to recover the demand growth rate for polycarbonate recovered with it to its historic norm of 5% or slightly higher and that’s the way we see the growth rates at this point moving forward, so polycarbonate has returned to reasonable growth rates, historic norm.

There were assets that were taken out of the business during that '11, '12, '13 period, there were assets that were above 80% globally in polycarbonate, which is about 12 percentage points higher than it was at the low point in roughly 2012, and the margins have recovered with that dynamic..

And then just a follow-up, the improvement in the margin per ton for polycarbonate this year -- I mean it seems to have progressed even though demand probably, it's reverted back, but it seems like a large move in the margin per ton just from a demand picking up a little bit.

Is some of that increase in margin driven by raw materials?.

Just to be clear on one thing, operating rate is in our view what drives these margins, okay? So demand of course is part of operating rate, but at the end of the day when you have operating rates moving up 12% in 18 months you're going to have margin expansion from operating rate and it is largely from operating rate not from raw materials that’s driving the improvement in margin in polycarbonate.

And I want to go back to the audience to one question about China just for a moment, because I know there is a lot of activity and noise in the industry about China. I don’t think it's a surprise to anybody on this phone, it certainly isn’t to us at Trinseo. China is slowing down as an economy guys for 18 months.

So we’ve been operating as that we have as a company and producing the kind of results we’ve been producing in a slowing China economy for well over a year now. So the notion at all of the sudden China is slowing is not news to us, nor is it news to us in relationship to our economic results.

And so I just want to make sure we all understand that we’ve been operating in these slowing China economy rates for greater than 12 months now, and producing the kind of results we have. So, just keep that in mind, if you should think about what's China is going to do going forward, has that affect styrene and so on and so forth..

Thank you. Our final question comes from the line of P.J. Juvekar of Citi.

Your line is open, your question please?.

This is Eric Petrie, on for P.J.

You know that that your rubber volumes are still about, I'm just curious as you're going into volume commitments with customers, are they requesting more SSBR volumes and do you have opportunity to expand capacity?.

Hi Eric, Chris.

First part of your question, yes the growth rate in SSBR continues to be 3 or so times the rate of -- the point is tyre is 3 or so times the rate of regular tyres which of course is fuelling SSBR and we are scrambling to do what we can to incrementally produce more SSBR in our asset, we won't have a turnaround next year so we'll have some more capacity, due to no outages and that will give us a little bit of headspace but we don’t have any immediately available new incremental capacity for our SSBR business, we're looking at a number of things, some of them pretty creative in order to get us some additional capacity in the forward years..

And then in terms of styrene monomer outages, you commented lower in 2016, could you just tell us what you expect and how's that compared to 2015? And then in addition give us the level of capacity for unplanned outages?.

Well, the second question is we don't know because they are unplanned, okay?.

But how much unplanned did we see in '15?.

We had a couple of unplanned outages in '15, we had of course the facility in Mornac that was out for the year, that one that I talked about that is coming backup at the end of the year and into next year, but in terms of planned outages the 2016 planned outages are pretty similar to the amount that's in that was planned in 2015, call it 6% to 8% or so of planned outages.

In 2015 we had approximately 6 or so percent best calculation of unplanned outages and we'll have to see how 2016 develops but again we have three years in a row with this aged asset base with slightly higher operating rates, there have been certain events around the world and while the numbers I gave you for 2016 as described earlier to Ryan, really is our fourth quarter run rate, we'll have to see whether we have margins in styrene that could spike up in 2016.

The probability to us looks reasonable that that might occur..

And then lastly, your net operations declined nicely, to 2.2 times less trailing 12 months, what is your target?.

We've always said 2 to 2.5 is our target, we're obviously at that target, John commented clearly that by the end of the year, we're going to be below that target.

You can do your own calculations and I think pretty precisely get to where we're going to be, but obviously we're generating a lot of cash, our EBITDA continues to be reasonably strong and our net leverage is coming down because of that and we're of course very pleased with the results of that at this time and I think we're going to continue to generate cash.

And John covered off I think the things we think about in terms of uses of cash going forward..

Thank you. Ladies and gentlemen, thank you very much for your participation in today's program. This does conclude the program, you may all now disconnect. Have a great day..