Consumables

Momentive Performance Materials Inc. Announces First Quarter 2013 Results

Friday 17. May 2013 - Momentive Performance Materials Inc. ("Momentive Performance Materials" or the "Company") today announced results for the first quarter ended March 31, 2013. Results for the first quarter of 2013 include:

Net sales of $570 million compared to $593 million in the prior year period.
Operating income of $17 million versus operating loss of $(5) million in the prior year period. First quarter 2013 operating income improved versus first quarter 2012 due to improved gross margins, a $2 million decrease in selling, general and administrative expenses, and a $5 million decrease in restructuring and other costs.
Net loss of $(61) million compared to a net loss of $(65) million in the prior year period, which reflected the improved operating income partially offset by a $16 million increase in interest costs.
Segment EBITDA of $68 million compared to $48 million in the prior year period. Segment EBITDA is a non-GAAP financial measure and is defined and reconciled to net loss later in this release.
“While sales declined slightly in first quarter 2013 compared to the prior year period, segment EBITDA increased significantly reflecting primarily the benefit of our ongoing cost control initiatives,” said Craig O. Morrison, Chairman, President and CEO. “Our Segment EBITDA margins also improved as we continue to take the necessary actions to optimize the business for the slower-growth environment we are currently experiencing globally. Although the quartz business continued to reflect poor semiconductor demand, our silicone volumes increased slightly in the first quarter of 2013 versus the first quarter of 2012.
“We remain focused on controlling the actions that we can directly control to partially offset the softer demand we are experiencing in parts of our portfolio. Through March 31, 2013, we have realized approximately $63 million in cost savings on a run-rate basis as a result of the Shared Services Agreement with MSC since the program began in late 2010. We also anticipate fully realizing $22 million of total pro forma savings that are remaining from the Shared Services Agreement and the incremental restructuring actions that we announced in July 2012 over the next nine to 18 months.”
Business Results
Following are net sales and Segment EBITDA by business for the first quarter ended March 31, 2013 and 2012. Segment EBITDA is defined as EBITDA adjusted for certain non-cash and certain other income and 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 businesses. Other primarily represents certain general and administrative expenses that are not allocated to the businesses. (Note: Segment EBITDA is defined and reconciled to net loss later in this release).
Refinancing Activities
In April 2013, the Company entered into two new secured revolving credit facilities: a $270 million asset-based revolving loan facility, which is subject to a borrowing base (the “ABL Facility”), and a $75 million revolving credit facility, which supplements the ABL Facility and is available subject to a certain utilization test based on borrowing availability under the ABL Facility (the “Cash Flow Facility”). The ABL Facility and Cash Flow Facility (collectively, the “April Refinancing”) replaced our prior senior secured credit facility (the “Old Credit Facility”).
Liquidity and Capital Resources
At March 31, 2013, the Company had approximately $3.2 billion of long-term debt compared to $3.1 billion of long-term debt at December 31, 2012. In addition, at March 31, 2013, the Company had $301 million in liquidity, including $116 million of unrestricted and cash equivalents and $185 million of borrowings available under the Old Credit Facility.
At March 31, 2013, the Company was in compliance with all covenants under the credit agreement governing the Old Credit Facility, including the senior secured debt to Adjusted EBITDA ratio maintenance covenant. Based on the Company’s current assessment of its operating plan and the general economic outlook, the Company believes that its cash flow from operations and available cash and cash equivalents, including available borrowings under its new secured revolving credit facilities, will be adequate to meet its liquidity needs for at least the next twelve months.
Outlook
“We continue to balance our growth initiatives, such as our recent international site investments, with our cost reduction programs,” Morrison said. ‘Looking ahead, we remain cautiously optimistic that our silicones business will continue to gradually recover throughout 2013 compared to 2012 levels. Our quartz customer sentiment also seems to be improving slightly.
“Finally, we continue to benefit from our long-dated maturity profile following several refinancing transactions over the past year. As of March 31, 2013 and on a pro forma basis for the April Refinancing, we had no material debt maturities prior to 2016. We believe we remain well positioned for the eventual market recovery.”