Consumables
Momentive Specialty Chemicals Inc. Announces Second Quarter 2012 Results
Thursday 09. August 2012 - Momentive Specialty Chemicals Inc. ("Momentive Specialty Chemicals" or the "Company") today announced results for the second quarter ended June 30, 2012. Results for the second quarter of 2012 include:
Revenues of $1.3 billion versus $1.4 billion in the second quarter of 2011 reflecting lower volumes partially offset by pricing actions including the contractual pass through of higher raw material costs.
Operating income of $92 million compared to operating income of $128 million for the prior year period. Second quarter 2012 operating income reflected unfavorable product mix due to declines in certain higher-margin products and lower volumes, partially offset by the positive impact of savings from the shared services agreement with Momentive Performance Materials Inc. (MPM).
Net income of $28 million versus net income of $63 million in the prior year period. Second quarter 2012 results reflected the same factors impacting operating income.
Segment EBITDA totaled $145 million compared to $189 million during the prior year period.
“Our broad product portfolio and geographic diversity continued to help in offsetting some of the global economic volatility we experienced in the second quarter of 2012,” said Craig O. Morrison, Chairman, President and CEO. “While our results lagged year-over-year in our base epoxy, specialty epoxy and oilfield resins businesses, we saw strong improvement in our Versatic Acids and Derivatives, North American forest products resins and our Latin America forest products businesses. In addition, we continued our focus on cost control as we achieved $12 million in savings under the shared services agreement with Momentive Performance Materials Inc. (MPM) in the first half of 2012.”
“We also continued to make significant progress in our long-term growth initiatives, such as increasing our manufacturing presence in the Asia Pacific region. We were pleased to begin operations of our new Versatic Acids and Derivatives joint venture in China during the second quarter of 2012.”
Segment Results
Following are net sales and Segment EBITDA by reportable segment for the second quarter ended June 30, 2012. Segment EBITDA is defined as EBITDA adjusted to exclude certain non-cash and non-recurring expenses. Segment EBITDA is an important measure used by the Company’s senior management and board of directors to evaluate operating results and allocate capital resources among segments. Corporate and Other primarily represents certain corporate, general and administrative expenses that are not allocated to the segments. (Note: Segment EBITDA is defined and reconciled to Net Income later in this release).
Net Sales to Unaffiliated Customers (1):
(In millions) Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Epoxy, Phenolic and Coating Resins $ 796 $ 972 $ 1,590 $ 1,818
Forest Products Resins 463 466 905 914
Total $ 1,259 $ 1,438 $ 2,495 $ 2,732
(1)
Intersegment sales are not significant and, as such, are eliminated within the selling segment.
Segment EBITDA:
(In millions) Three Months Ended June 30, Six Months Ended June 30,
2012 2011 2012 2011
Epoxy, Phenolic and Coating Resins $ 101 $ 157 $ 215 $ 307
Forest Products Resins 56 50 102 95
Corporate and Other(2) (12 ) (18 ) (26 ) (35 )
(2)
For the six months ended June 30, 2012, the Company has reclassified approximately $3 of costs into Corporate and Other Segment EBITDA which relate to the three months ended March 31, 2012.
Reconciliation of Segment EBITDA to Net Income (Unaudited)
(In millions)
Three Months Ended
June 30,
Six Months Ended
June 30,
2012 2011 2012 2011
Segment EBITDA:
Epoxy, Phenolic and Coating Resins $ 101 $ 157 $ 215 $ 307
Forest Products Resins 56 50 102 95
Corporate and Other (12 ) (18 ) (26 ) (35 )
Reconciliation:
Items not included in Segment EBITDA:
Asset impairments and other non-cash charges (21 ) (48 ) (21 )
Business realignment costs (3 ) (5 ) (18 ) (8 )
Integration costs (1 ) (5 ) (6 ) (10 )
Net (loss) income from discontinued operations (3 ) 2
Other (3 ) 16 4 12
Total adjustments (7 ) (18 ) (68 ) (25 )
Interest expense, net (67 ) (65 ) (132 ) (129 )
Income tax expense (4 ) (2 ) (3 )
Depreciation and amortization (39 ) (43 ) (77 ) (84 )
Net income $ 28 $ 63 $ 12 $ 126
Liquidity and Capital Resources
At June 30, 2012, Momentive Specialty Chemicals had total debt of approximately $3.5 billion, unchanged compared to December 31, 2011. In addition, at June 30, 2012, the Company had $602 million in liquidity comprised of $333 million of unrestricted cash and cash equivalents, $187 million of borrowings available under our senior secured revolving credit facilities, and $82 million of borrowings available under additional credit facilities at certain international subsidiaries.
At June 30, 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. Momentive Specialty Chemicals expects to have adequate liquidity to fund its ongoing operations for the next twelve months from cash on its balance sheet, cash flows provided by operating activities and amounts available for borrowings under its credit facilities.
Outlook
“While we anticipate continued volatility in the second half of 2012, our business is well positioned going forward due to our strategic global footprint, leading thermoset resin technology and our lean cost structure,” Morrison said. “Our focus remains on driving growth while reducing costs across our manufacturing structure, as well as serving our world-class customers.”