Consumables

Momentive Specialty Chemicals Inc. Announces First Quarter 2013 Results

Thursday 16. May 2013 - Momentive Specialty Chemicals Inc. ("Momentive Specialty Chemicals" or the "Company") today announced results for the first quarter ended March 31, 2013. Results for the first quarter of 2013 include:

Revenues of $1.2 billion versus $1.2 billion in the first quarter of 2012.
Operating income of $45 million compared to operating income of $44 million for the prior year period. First quarter 2013 operating income reflected lower volumes and slightly higher selling, general and administrative costs, offset by decreased asset impairments, lower business realignment costs and the positive impact of savings from the shared services agreement with Momentive Performance Materials Inc. (“MPM”).
Net loss of $(4) million versus net loss of $(16) million in the prior year period. First quarter 2013 results reflect the same factors impacting operating income, a $32 million income tax benefit and a $6 million loss on extinguishment of debt.
Segment EBITDA totaled $105 million compared to $146 million during the prior year period.
“North American housing and our past restructuring initiatives, particularly in Europe, continued to drive strong results in our forest products business in the first quarter of 2013,” said Craig O. Morrison, Chairman, President and CEO. “We continued to experience softer results in our oilfield proppants business due to lower demand, although we believe this remains a long-term growth business for us. Demand for our specialty and base epoxy resins in the first quarter of 2013 also trailed the prior year results. Despite these headwinds, we continue to prudently balance our growth initiatives with our global cost reduction initiatives and the savings from the shared services agreement with MPM. As of the first quarter of 2013, we are working toward achieving $17 million of in-process cost savings that we expect to achieve over the next 12 to 15 months.”
“We were also pleased to successfully complete the refinancing of portions of our capital structure in the first quarter of 2013, which further extended our debt maturity profile. Following these transactions, we do not have any material debt maturities prior to 2018.”
Segment Results
Following are net sales and Segment EBITDA by reportable segment for the first quarter ended March 31, 2013 and 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.
Refinancing Activities
In January 2013, the Company issued $1.1 billion aggregate principal amount of 6.625% First-Priority Senior Secured Notes due 2020 at an issue price of 100.75% (the “New First-Priority Senior Secured Notes”). The Company used the net proceeds of $1.108 billion ($1.1 billion plus a premium of $8 million) to repay approximately $910 million of term loans under the Company’s senior secured credit facilities, to purchase and redeem $120 million principal amount of the Company’s Floating Rate Second-Priority Senior Secured Notes due 2014, to pay related transaction costs and expenses and to provide incremental liquidity of $54 million. The New First-Priority Senior Secured Notes were issued as additional notes under the indenture governing the Company’s existing 6.625% First-Priority Senior Secured Notes due 2020 and have the same terms as such notes.
In January 2013, the Company also issued $200 million aggregate principal amount of 8.875% Senior Secured Notes due 2018 (the “New Senior Secured Notes”). The New Senior Secured Notes were issued to lenders in exchange for loans of Momentive Specialty Chemicals Holdings LLC, which were retired in full. The New Senior Secured Notes were issued as additional notes under the indenture governing the Company’s existing 8.875% Senior Secured Notes due 2018 and have the same terms as such notes.
Additionally, in late March 2013, the Company entered into a new $400 million asset-based revolving loan facility, which is subject to a borrowing base (the “ABL Facility”). The ABL facility replaced the $171 million revolving credit facility and the $47 million synthetic letter of credit facility under the Company’s senior secured credit facilities. Collectively, the Company refers to these transactions as the “2013 Refinancing Transactions.”
Liquidity and Capital Resources
At March 31, 2013, Momentive Specialty Chemicals had total debt of approximately $3.8 billion compared to $3.5 billion at December 31, 2012. In addition, at March 31, 2013, the Company had $770 million in liquidity comprised of $397 million of unrestricted cash and cash equivalents, $301 million of borrowings available under the ABL Facility and $72 million of borrowings available under additional credit facilities at certain international subsidiaries.
At March 31, 2013, the Company was in compliance with all covenants under the credit agreement that governs the ABL Facility. 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
“We continue to expect that our overall volumes will be moderately higher in 2013 compared to 2012,” Morrison said. “Our focus also remains on carefully managing liquidity and cash flows in 2013. Longer term, we believe our growth story will be driven by our diversified portfolio, our new product development initiatives and our steady expansion in high-growth markets. For example, we recently announced the successful start-up of our new acrylic resins plant in Thailand. In addition, our phenolic resins joint venture in China currently under production continues to progress as planned and is expected to begin operations by the end of 2013. We were also pleased to form a strategic joint venture, Momentive Specialty Chemicals Australia Pty Ltd, in January 2013 to serve forest products customers in Australia and New Zealand. We believe we are well positioned to capitalize on these additions to our global footprint going forward.”