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ALBANY, N.Y., (May 7, 2012) – Momentive Performance Materials Inc. (“Momentive Performance Materials” or the “Company”) today reported its consolidated results for the first quarter ended March 31, 2012. Results for the first quarter of 2012 include:
“While we experienced lower volumes and Adjusted EBITDA in the first quarter of 2012 compared to the prior year, our sequential quarterly improvement demonstrates the beginning of a rebound from the lows of the fourth quarter,” said Craig O. Morrison, Chairman, President, and CEO. “Our first quarter 2012 results reflected a shift in product mix as we continued to experience softer demand for higher-margin products in the Asia Pacific region, as well as declines in our quartz earnings.
In response, we have further enhanced our focus on reducing our cost structure, including steadily achieving savings from the shared services agreement with Momentive Specialty Chemicals Inc. (MSC). In the first quarter of 2012, we achieved $7 million in savings under the shared services agreement with MSC, and we have realized approximately $47 million in synergy savings on a run-rate basis since the program began in late 2010. Beyond the cost-saving initiatives with MSC, plans are in process for additional restructuring programs to further enhance our cost structure and better serve our customers.”
Net sales in the three-month period ended March 31, 2012, were $593 million, compared to $660 million for the three-month period ended April 3, 2011, a decrease of 10 percent. The decrease was primarily due to a decrease in price and mix shift of $49 million and volume of $17 million.
Net sales for the Silicones segment in the three-month period ended March 31, 2012, were $536 million, compared to $572 million for the quarter-ended March 31, 2011, a decrease of 6 percent. The decrease was primarily due to a decrease in price and mix shift of $49 million, partially offset by an increase in volume of $14 million.
Net sales for the Quartz segment in the three-month period ended March 31, 2012, were $57 million, compared to $88 million for the three-month period ended April 3, 2011, a decrease of 35 percent. The decrease was due to lower volumes reflecting a downturn in demand for semiconductor capital goods.
Outlook
“As previously disclosed, we continued to see sequential improvement in our average daily order rate for our silicone products through March 2012 versus year-end 2011 levels,” Morrison said. “We believe that over time we will return to margins more in line with our historical results and that we are well-positioned for the long-term as we take actions to align our business for a gradual recovery that is expected to occur in 2012.
In addition to our focus on productivity, we remain committed to investing in the long-term growth of our specialty materials platform globally. We recently announced an additional investment in our Chennai, India site, completed our quartz expansion at our Newark, Ohio site, and our other quartz expansion projects remain on track. Integration of a number of global Momentive Performance Materials and MSC research and development sites continues in an effort to accelerate our new product development pipeline, which we expect to help drive future growth.”
Refinancing Activities
In April 2012, Momentive Performance Materials incurred incremental term loans due May 2015 under its senior secured credit facilities in an aggregate principal amount of $175 million. Net consideration from the transaction (which consisted of a combination of cash and rollover debt after discounts and fees), together with cash on hand, was used to extinguish approximately $178 million of existing term loans maturing December 2013, effectively extending the Company’s debt maturity profile. The refinancing was executed by the Company’s wholly owned subsidiary Momentive Performance Materials GmbH, the German Borrower under its senior secured credit facilities.
Liquidity and Capital Resources
At March 31, 2012, Momentive Performance Materials had $3.0 billion of long-term debt compared to $2.9 billion of long-term debt at December 31, 2011. In addition, at March 31, 2012, Momentive Performance Materials had $378 million in liquidity, including $122 million of cash and cash equivalents and $256 million of borrowings available under our senior secured revolving credit facility. At March 31, 2012, the Company was in compliance with all financial covenants that govern its senior secured credit facilities, including its senior secured debt to Adjusted EBITDA ratio. Based on Momentive Performance Materials’ current assessment of its operating plan and the general economic outlook, the Company believes that its cash flow from operations and available cash, including available borrowings under its senior secured credit facilities, will be adequate to meet its liquidity needs for the foreseeable future.
Earnings Call
Momentive Performance Materials will host a teleconference to discuss first-quarter 2012 results on Monday, May 7, 2012, at 10 a.m. Eastern Time. Interested parties are asked to dial in approximately 10 minutes before the call begins at the following numbers:
U.S. Participants: 866-770-7051
International Participants: 617-213-8064
Participant Passcode: 13829105
Live internet access to the call and presentation materials will be available through the Investor Relations section of the Company’s website: www.momentive.com. A replay of the call will be available for three weeks beginning at 1 p.m. Eastern Time on May 7, 2012. The playback can be accessed by dialing 888-286-8010 (U.S.) and +1-617-801-6888 (International). The passcode is 77420174. A replay also will be available through the Investor Relations Section of the Company’s website.
Covenants under our Senior Secured Credit Facility and the Notes
The credit agreement governing our senior secured credit facilities and the indentures governing the notes contain various covenants that limit our ability to, among other things:
In addition, at any time that loans or letters of credit are outstanding (and not cash collateralized) thereunder, our revolving credit facility (which is part of our senior secured credit facilities) requires us to maintain a specified net first-lien indebtedness to Adjusted EBITDA ratio, referred to as the “Senior Secured Leverage Ratio.” Specifically, the ratio of our “Total Senior Secured Net Debt” (as defined in the credit agreement governing the senior secured credit facilities) to trailing twelve-month Adjusted EBITDA (as adjusted per the credit agreement governing the senior secured credit facilities) may not exceed 4.25 to 1 as of the last day of any fiscal quarter. In addition, our ability to incur indebtedness or make investments is restricted under the indentures governing our notes unless we have an Adjusted EBITDA to fixed charges ratio (measured on a last twelve months basis) of at least 2.00 to 1.00. “Fixed charges” are defined under the indentures as net interest expense, excluding the amortization or write-off of deferred financing costs. As of March 31, 2012, we were not able to satisfy this test. The restrictions on our ability to incur indebtedness or make investments under the indentures, however, are subject to exceptions, including exceptions that permit indebtedness under our senior secured credit facilities. On March 31, 2012, we were in compliance with the senior secured leverage ratio maintenance covenant, the other covenants under the credit agreement governing the senior secured credit facilities, and the covenants under the indentures governing the notes.
Reconciliation of Financial Measures that Supplement U.S. GAAP
EBITDA consists of earnings before interest, taxes and depreciation and amortization. EBITDA is a measure commonly used in our industry, and we present EBITDA to enhance your understanding of our operating performance. We use EBITDA as one criterion for evaluating our performance relative to that of our peers. We believe that EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. Adjusted EBITDA is defined as EBITDA further adjusted for unusual items and other pro forma adjustments permitted in calculating covenant compliance in the credit agreement governing our credit facilities and indentures governing the notes to test the permissibility of certain types of transactions. Adjusted EBITDA, as presented in the table below, corresponds to the definition of “EBITDA” calculated on a “Pro Forma Basis” used in the credit agreement and substantially conforms to the definition of “EBITDA” calculated on a pro forma basis used in the indentures. Adjusted EBITDA has important limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of our results as reported under U.S. GAAP. For example, Adjusted EBITDA does not reflect: (a) our capital expenditures, future requirements for capital expenditures, or contractual commitments; (b) changes in, or cash requirements for, our working capital needs; (c) the significant interest expenses or the cash requirements necessary to service interest or principal payments on our debt; (d) tax payments that represent a reduction in cash available to us; (e) any cash requirements for the assets being depreciated and amortized that may have to be replaced in the future; (f) management fees that may be paid to Apollo; or (g) the impact of earnings or charges resulting from matters that we and the lenders under our secured senior credit facilities may not consider indicative of our ongoing operations. In particular, our definition of Adjusted EBITDA allows us to add back certain non-cash, non-operating, or non-recurring charges that are deducted in calculating net income, even though these are expenses that may recur, vary greatly, and are difficult to predict and can represent the effect of long-term strategies as opposed to short-term results. In addition, certain of these expenses can represent the reduction of cash that could be used for other corporate purposes. Further, as included in the calculation of Adjusted EBITDA below, the measure allows us to add estimated cost savings and operating synergies related to operational changes ranging from restructuring to acquisitions to dispositions as if such events occurred on the first day of the four consecutive fiscal quarter period ended on or before the occurrence of such event and/or exclude one-time transition expenditures that we anticipate we will need to incur to realize cost savings before such savings have occurred. Adjusted EBITDA excludes the EBITDA of our subsidiaries that are designated as Unrestricted Subsidiaries under our debt documents. We define Combined Adjusted EBITDA as Adjusted EBITDA modified to include the EBITDA of our subsidiaries that are designated as Unrestricted Subsidiaries under our debt documents. Combined Adjusted EBITDA is an important performance measure used by our senior management and the board of directors to evaluate operating results and allocate capital resources.
EBITDA, Adjusted EBITDA, and Combined Adjusted EBITDA are not measurements of financial performance under U.S. GAAP, and our EBITDA, Adjusted EBITDA, and Combined Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA, Adjusted EBITDA, or Combined Adjusted EBITDA, which are non-U.S. GAAP financial measures, as an alternative to operating or net income determined in accordance with U.S. GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of our cash flows or as a measure of liquidity. The following table reconciles net loss attributable to Momentive Performance Materials Inc. to EBITDA, Adjusted EBITDA (as calculated under our credit agreement and as substantially calculated under our indentures), and Combined Adjusted EBITDA for the periods presented:
Forward-Looking and Cautionary Statements
Certain statements in this press release are forward-looking statements within the meaning of and made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, our management may from time to time make oral forward-looking statements. All statements, other than statements of historical facts, are forward-looking statements. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “project,” “plan,” “estimate,” “may,” “will,” “could,” “should,” “seek,” or “intend” and similar expressions. Forward-looking statements reflect our current expectations and assumptions regarding our business, the economy, and other future events and conditions and are based on currently available financial, economic, and competitive data and our current business plans. Actual results could vary materially depending on risks and uncertainties that may affect our operations, markets, services, prices, and other factors as discussed in the Risk Factors section of our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”). While we believe our assumptions are reasonable, we caution you against relying on any forward-looking statements as it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, a weakening of global economic and financial conditions, interruptions in the supply of or increased cost of raw materials, changes in governmental regulations and related compliance and litigation costs, difficulties with the realization of cost savings in connection with our strategic initiatives, including transactions with our affiliate, Momentive Specialty Chemicals Inc., pricing actions by our competitors that could affect our operating margins, the impact of our substantial indebtedness, our failure to comply with financial covenants under our credit facilities or other debt, and the other factors listed in the Risk Factors section of our most recent Annual Report on Form 10-K and in our other SEC filings. For a more detailed discussion of these and other risk factors, see the Risk Factors section in our most recent Annual Report on Form 10-K and our other filings made with the SEC. All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The forward-looking statements made by us speak only as of the date on which they are made. Factors or events that could cause our actual results to differ may emerge from time to time. 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.
About the Company
Momentive Performance Materials Inc. is a global leader in silicones and advanced materials, with a 70-year heritage of being first to market with performance applications for major industries that support and improve everyday life. The Company delivers science-based solutions by linking custom technology platforms to opportunities for customers. Momentive Performance Materials Inc. is an indirect wholly owned subsidiary of Momentive Performance Materials Holdings LLC, the owner of its sister company, Momentive Specialty Chemicals Inc., the global leader in thermoset resins. Additional information is available at www.momentive.com.
About Momentive
Momentive Performance Materials Holdings LLC is the ultimate parent company of Momentive Performance Materials Inc. and Momentive Specialty Chemicals Inc. (collectively, “Momentive”). Momentive is a global leader in specialty chemicals and materials, with a broad range of advanced specialty products that help industrial and consumer companies support and improve everyday life. The company uses its technology portfolio to deliver tailored solutions to meet the diverse needs of its customers around the world. Momentive was formed in October 2010 through the combination of entities that indirectly owned Momentive Performance Materials Inc. and Hexion Specialty Chemicals Inc. The capital structures and legal entity structures of both Momentive Performance Materials Inc. and Momentive Specialty Chemicals Inc. (formerly known as Hexion Specialty Chemicals, Inc.), and their respective subsidiaries and direct parent companies, remain separate. Momentive Performance Materials Inc. and Momentive Specialty Chemicals Inc. file separate financial and other reports with the Securities and Exchange Commission. Momentive is controlled by investment funds affiliated with Apollo Global Management, LLC. Additional information about Momentive and its products is available at www.momentive.com.
Contacts Investors:
John Kompa
614-225-2223
john.kompa@momentive.com
Media:
John Scharf 518-233-3893
john.scharf@momentive.com
(See Attached Financial Statements)
Como empresa líder mundial en silicios y especialidades de alto rendimiento, Momentive crea soluciones que mejoran la calidad de vida de las personas y posibilitan un futuro más sostenible.
