Empresas y finanzas

Momentive Performance Materials Inc. Reports 2006 Results



    Momentive Performance Materials Inc. ("Momentive" or "the
    Company") today reported its combined results for the year ended
    December 31, 2006. Highlights for 2006 include:

    -- Net sales of $2,414.1 million in 2006 compared to $2,341.9
    million in 2005.

    -- Operating income of $100.8 million versus operating income of
    $222.8 million in 2005.

    -- Net loss of $36.9 million in 2006 compared to net income of
    $74.3 million in 2005.

    -- Adjusted EBITDA of $427.8 million for the Last Twelve Month
    (LTM) period ended December 31, 2006 compared to Adjusted
    EBITDA of $417.2 million in 2005. (Note: Adjusted EBITDA is a
    non-GAAP measure and is defined and reconciled to Net Income
    later in this release).

    On December 3, 2006, Momentive Performance Materials Inc. acquired
    GE Advanced Materials ("the Transaction"), an operating unit of
    General Electric Company. The purchase price for GE Advanced Materials
    as of the acquisition date was approximately $3.8 billion subject to
    certain purchase price adjustments. In connection with the
    acquisition, the Company issued $3,031.2 million of debt, consisting
    of $50.0 million of drawn revolving credit facility, a $1,053.1
    million term loan B facility, $765.0 million of senior notes, $300
    million of senior toggle notes, $363.1 million of Euro senior notes
    and $500.0 million of senior subordinated notes. The total
    availability of our revolving credit facility is $300.0 million, of
    which $50.0 million was borrowed at the closing of the Transaction,
    and which has no outstanding balance, with the exception of $3.3
    million of funded letters of credit, as of December 31, 2006.

    "The Company has made significant steps into transforming itself
    into a self-reliant, standalone business," said Wayne Hewett,
    President and CEO. "We are competing admirably in the market,
    executing on our business plan, and completing the steps necessary to
    ensure that Momentive is a strong and focused standalone business.
    There is clearly a lot of work for us to do, in terms of expanding
    growth and tempering inflationary trends, both of which we are focused
    on improving."

    Summary Results

    In the following discussion, comparisons are made between the
    years ended December 31, 2006 (combined) and December 31, 2005,
    notwithstanding the presentation in our consolidated and combined
    statements of operations for the year ended December 31, 2006, the
    Successor period from December 4, 2006 to December 31, 2006 and the
    Predecessor period from January 1, 2006 to December 3, 2006. A split
    presentation of an annual period is required under GAAP when a change
    in accounting basis occurs. Consequently, the combined presentation
    for 2006 is not a recognized presentation under GAAP. Accounting for
    an acquisition requires that the historical carrying values of assets
    acquired and liabilities assumed be adjusted to fair value. A
    resulting higher cost basis associated with the allocation of the
    purchase price impacts post-acquisition period results, which impacts
    period-to-period comparisons. We believe a discussion of the separate
    periods presented for the year ended December 31, 2006 in our
    consolidated and combined statements of operations may impede
    understanding of our operating performance. The impact of the
    acquisition on the 28-day Successor period does not materially affect
    the comparison of the annual periods and, accordingly, we have
    prepared the discussion of our results of operations by comparing the
    year ended December 31, 2006 (combined) with the year ended
    December 31, 2005 without regard to the differentiation between
    Predecessor and Successor results of operations for the Predecessor
    period from January 1, 2006 to December 3, 2006 and the Successor
    period from December 4, 2006 to December 31, 2006.

    The following table sets forth certain historical consolidated and
    combined financial information for the year ended December 31, 2005
    and the combined successor and predecessor periods for the year ended
    December 31, 2006:

    -0-
    *T

    Predecessor Successor Combined
    Predecessor
    and
    Successor
    --------------------- --------- ------------

    Year Ended Period Period Year Ended
    December from from December
    31, 2005 January December 31, 2006
    1, 2006 4, 2006
    to to
    December December
    3, 2006 31, 2006
    ----------- --------- --------- ------------
    (dollars in millions)
    Net sales $2,341.9 $2,168.0 $246.1 $2,414.1
    Cost of sales 1,429.6 1,397.6 185.2 1,582.8
    ----------- --------- --------- ------------
    Gross profit 912.3 770.4 60.9 831.3

    Selling, general and
    administrative expenses 617.3 534.6 52.9 587.5
    Research and development
    expenses 72.2 72.8 7.4 80.2
    In-process research and
    development - 0.0 52.0 52.0
    Restructuring and other
    costs - 10.6 0.20 10.8
    ----------- --------- --------- ------------
    Operating income 222.8 152.4 (51.6) 100.8
    Other income (expenses)
    Interest expense, net (16.6) (11.8) (21.6) (33.4)
    Other income (expense),
    net (1.7) (4.7) 0.0 (4.7)
    Minority interests (64.7) (43.9) (0.1) (44.0)
    ----------- --------- --------- ------------
    Income (loss) before
    income taxes 139.8 92.0 (73.3) 18.7

    Income taxes 65.5 58.3 (2.7) 55.6
    ----------- --------- --------- ------------
    Net income (loss) $74.3 $33.7 $(70.6) $(36.9)
    =========== ========= ========= ============

    Net Sales by Segment
    Silicones $2,094.5 $1,925.7 $219.2 2,144.9
    Quartz 247.4 $242.3 $26.9 269.2
    ----------- --------- --------- ------------
    Total $2,341.9 $2,168.0 $246.1 $2,414.1
    =========== ========= ========= ============
    *T

    Net sales. Net sales in 2006 were $ 2,414.1 million, compared to
    $2,341.9 million in 2005, an increase of 3.1%. The increase was driven
    by a 4.7% increase in sales volume, reflecting growth in both our
    Silicones and Quartz divisions, which was partially offset by
    unfavorable exchange rates fluctuations of 0.9% and a modest decrease
    in selling prices.

    Cost of sales. Cost of sales in 2006 was $1,582.8 million,
    compared to $1,429.6 million in 2005, an increase of 10.7%. Cost of
    sales increased by $153.2 million primarily due to increases in sales
    volume, higher costs of raw materials and energy and increased labor
    costs, and the impact of a $34.4 million charge to cost of sales
    during December 2006 resulting from the sale of inventory that had
    been revalued at fair value in the purchase accounting at the date of
    the transaction.

    Gross Profit. Gross profit in 2006 was $831.3 million or 34.4% of
    net sales, compared to $912.3 million or 39% of net sales, a decrease
    of 8.9%. The decrease is primarily due to the impact of increase in
    cost of net sales described above.

    Reconciliation of Net Income to Adjusted EBITDA

    Certain covenants contained in the credit agreement governing our
    credit facilities and the indentures governing the Senior Notes,
    Senior Toggle Notes and Senior Subordinated Notes (i) require the
    maintenance of a net first-lien secured indebtedness to Adjusted
    EBITDA ratio and/or (ii) restrict our ability to take certain actions
    such as incurring additional debt or making acquisitions if we are
    unable to meet certain financial tests. For example, the indenture
    covenants restrict our ability to incur additional indebtedness unless
    we are able to comply, on a pro forma basis, with an Adjusted EBITDA
    to Fixed Charges ratio (measured on a trailing four-quarter basis) of
    2.0:1.0. Inability to comply with such covenants can result in
    limiting our long-term growth prospects by hindering our ability to
    incur future indebtedness or grow through acquisitions.

    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 to exclude unusual items and other pro forma adjustments
    permitted in calculating covenant compliance in the indentures
    governing the notes to test the permissibility of certain types of
    transactions. However, EBITDA and Adjusted EBITDA are not measurements
    of financial performance under U.S. GAAP, and our EBITDA and Adjusted
    EBITDA may not be comparable to similarly titled measures of other
    companies. You should not consider our EBITDA or Adjusted EBITDA 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 income to EBITDA and Adjusted
    EBITDA for the periods presented:

    -0-
    *T

    Successor Predecessor Combined Predecessor
    --------- ----------- Successor ---------------
    Period from and
    --------------------- Predecessor
    Year ended Year Ended
    January 1, December December 31,
    December
    4, 2006 2006 to 31, 2006
    to December
    December 3, 2006
    31, 2006 2005 2004
    --------- ----------- ------------ ------- -------

    (dollars in millions)

    Net income (loss) $(70.6) $33.7 $(36.9) $74.3 $67.4
    Interest expense,
    net 21.6 11.8 33.4 16.6 23.4
    Income taxes (2.7) 58.3 55.6 65.5 45.6
    Depreciation and
    amortization 27.0 153.4 180.4 186.3 182.1
    --------- ----------- ------------ ------- -------

    EBITDA $(24.7) $257.2 $232.5 $342.7 $318.5
    ========= =========== ============ ======= =======

    Minority interest(a) 49.8 $63.4
    Non Cash,
    Purchase
    accounting
    effects (b) 86.4 -
    Stand-alone
    savings -
    assessment (c) 15.7 14.4
    U.S. benefit plan
    savings (d) 4.0 2.8
    Cost savings -
    new initiatives (e) 7.4 -
    Restructuring and
    stand-alone
    costs (f) 10.8 0.5
    Transaction and
    initial costs (g) 21.2 (6.6)
    ------------ -------
    Adjusted EBITDA $427.8 $417.2
    ============ =======
    *T

    (a) Reflects the elimination of minority interests resulting from
    the acquisition of the remaining shareholder interest in joint
    ventures with Toshiba and Bayer of $63.4 million in 2005 and $44.9
    million in 2006 and the consolidation from May 2006 to December 3,
    2006 of OSi Italy.

    (b) Represents non-cash charges of that have been revalued at fair
    value at the date of the Acquisition. The non-cash charges are
    comprised by (i) $34.4 million to cost of sales during December 2006
    resulting from the sales of inventories and (ii) $52.0 million of
    in-process research and development intangible assets charged in
    December 2006.

    (c) Represents stand-alone cost savings for functions and services
    previously provided by GE and its affiliated companies. These services
    were historically billed to us via an assessment and related to
    functions such as IT, finance, treasury, operations, research and
    development, insurance, legal, and human resources. The assessment was
    $62.5 million for 2005 and $62.6 million for 2006 and will not
    continue on a stand-alone basis.

    (d) Represents savings related to the design of our U.S. benefit
    plans as compared to the cost historically billed directly to us by GE
    for the administration of benefit programs in the U.S.

    (e) Represents cost savings from initiatives which have been
    implemented by management, including headcount reductions, reduction
    in number of legal entities, and consolidation of warehouses and
    offices.

    (f) Primarily relates to restructuring and initial stand-alone
    costs related to the transaction, including (i) consulting services
    related to setting up our US benefit plan and other services of $3.3
    million, (ii) retention payments of $3.3 million, (iii) costs for the
    transfer of production to a new facility and a reorganization of a
    sales force in Europe of $3.0 million and other adjustments of $1.2
    million.

    (g) Represents initial and start-up cost related to establishing
    Momentive as a stand-alone entity in 2006, which includes (i) non-cash
    items of $14.9 million that will not repeat including inventory
    reserves and other non-recurring one-time charges (ii) other
    consulting fees and services of $3.6 million and (iii) the
    discontinuation of royalty payments to Toshiba of $2.7 million. In
    2005, represents the elimination of a gain on sale of our 49% interest
    in the Dong Yang Silicones Co. Ltd. joint venture to the majority
    owner in the second quarter of 2005 of $4.1 million and other
    adjustments of $2.5 million.

    Forward Looking Statements

    Certain statements in this press release are forward-looking
    statements within the meaning 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, the Company's management may from time
    to time make oral forward-looking statements. Forward-looking
    statements may be identified by the words "believe," "expect,"
    "anticipate," "project," "plan," "estimate," "will" or "intend" and
    similar expressions. The forward-looking statements contained herein
    reflect our current views with respect to future events and are based
    on our currently available financial, economic and competitive data
    and on current business plans. Actual results could vary materially
    depending on risks and uncertainties that may affect our operations,
    markets, services, prices and other factors. Important factors that
    could cause actual results to differ materially from those in the
    forward-looking statements include, but are not limited to: economic
    factors such as an interruption in the supply of or increased pricing
    of raw materials due to natural disasters, competitive factors such as
    pricing actions by our competitors that could affect our operating
    margins, and regulatory factors such as changes in governmental
    regulations involving our products that lead to environmental and
    legal matters.

    About the Company

    Momentive Performance Materials Inc. is a premier specialty
    materials company, providing high-technology materials solutions to
    the silicones, quartz and ceramics markets. The company is a global
    leader with worldwide operations, a robust product portfolio,
    industry-leading research and development capabilities, and a long
    tradition of service excellence. Momentive Performance Materials Inc.
    is owned by an affiliate of Apollo Management, L.P. Additional
    information is available at www.momentive.com.