Momentive Performance Materials Inc. ("Momentive" or the "Company")
today reported its consolidated results for the fiscal three-month
period ended March 30, 2008. Highlights include:
Net sales of $656.6 million compared to $608.2 million in the fiscal
three-month period ended April 1, 2007, an increase of 8.0%.
Adjusted EBITDA of $105.9 million compared to Adjusted EBITDA of
$103.4 million in the fiscal three-month period ended April 1, 2007
an increase of 2.4%.
Operating income of $42.1 million versus operating income of $13.1
million in the fiscal three-month period ended April 1, 2007.
Net loss of $48.9 million compared to net loss of $57.3 million in the
fiscal three-month period ended April 1, 2007.
"We are pleased to report
year-over-year growth in net sales and Adjusted EBITDA for the first
quarter despite a challenging inflationary environment," said Jonathan Rich, president & CEO. He added, "Although
we face rising raw material and energy costs, we continue to work to
offset inflation through productivity and other cost savings measures
and focus on growing the business through specialty products."
For more information, interested parties may participate in Momentive´s
First Quarter 2008 Earnings Conference Call on Thursday, May 15, 2008 at
9 A.M. EDT:
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U.S. Toll-Free:
800.638.5439
- - - - - -
Outside of the U.S.:
+617.614.3945
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Password:
62058731
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Forward-Looking and Cautionary Statements
Certain statements included in this press release may constitute
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, our 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 words or expressions. These forward-looking statements reflect
our current views with respect to future events 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. Important factors that could cause
actual results to differ materially from those in the forward-looking
statements include, but are not limited to: our substantial leverage;
limitations on flexibility in operating our business contained in the
documents governing our indebtedness; changes in prices and availability
of raw materials and key intermediates; rising energy costs; and risks
associated with our separation from General Electric Company. For a more
detailed discussion of these and other risk factors, see our Form 10-K
for the year ended December 31, 2007 and our other reports filed with
the Securities and Exchange Commission. 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 premier specialty materials
company, providing high-technology materials solutions to the silicones
quartz and ceramics markets. The company, as a global leader with
worldwide operations, has a robust product portfolio, an enduring
tradition of service excellence, and industry-leading research and
development capabilities. Momentive Performance Materials Inc. is
controlled by an affiliate of Apollo Management L.P. Additional
information is available at www.momentive.com.
Summary Results
The following table sets forth certain historical consolidated financial
information, in both dollars and percentages of net sales, for the
fiscal three-month periods ended March 30, 2008 and April 1, 2007:
= = = = = = = = = = =
Fiscal three-month periods ended
- - - - - -
March 30
April 1
- - - - - -
2008
2007
- - - - - -
(dollars in millions)
- - - - - -
Net sales
- - - - - -
Cost of sales, excluding depreciation
$
656.6
100.0
%
$
608.2
100.0
%
- - - - - -
Gross profit
433.1
66.0
%
409.2
67.3
%
- - - - - -
223.5
34.0
%
199.0
32.7
%
- - - - - -
- - - - - -
Selling, general and administrative expenses
159.2
24.2
%
160.9
26.5
%
- - - - - -
Research and development expenses
17.9
2.7
%
19.4
3.2
%
- - - - - -
Restructuring and other costs
4.3
0.7
%
5.6
0.9
%
- - - - - -
Operating income
42.1
6.4
%
13.1
2.2
%
- - - - - -
Other income (expenses)
- - - - - -
Interest expense, net
(67.0
)
(10.2)
%
(68.1
)
(11.2)
%
- - - - - -
Other income (expense), net
(13.6
)
(2.1)
%
(5.0
)
(0.8)
%
- - - - - -
Minority interests
0.1
-
-
-
- - - - - -
Loss before income taxes
(38.4
)
(5.8)
%
(60.0)
(9.9)
%
- - - - - -
- - - - - -
Income taxes
10.5
1.6
%
(2.7)
(0.4)
%
- - - - - -
Net loss
$
(48.9
)
(7.4)
%
$
(57.3)
(9.4)
%
- - - - - -
- - - - - -
Net Sales by Segment
- - - - - -
Silicones
$
589.7
89.8
%
$
534.8
87.9
%
- - - - - -
Quartz
66.9
10.2
%
73.4
12.1
%
- - - - - -
Total
$
656.6
100.0
%
$
608.2
100.0
%
- - - - - -
Net Sales. Net sales in the fiscal three-month
period ended March 30, 2008 were $656.6 million, compared to $608.2
million for the same period in 2007, an increase of 8.0%. The increase
was primarily due to an increase in volume of 1%, an increase in selling
prices, and foreign currency exchange rate fluctuations of 4.5%.
Net sales for our Silicones segment in the fiscal three-month period
ended March 30, 2008 were $589.7 million, compared to $534.8 million for
the same period in 2007, an increase of 10.3%. The increase was
primarily due to higher sales volume of 2.6%, an increase in selling
prices, and foreign currency exchange rate fluctuations of 4.8%.
Net sales for our Quartz segment in the fiscal three-month period ended
March 30, 2008 were $66.9 million, compared to $73.4 million for the
same period in 2007, a decrease of 8.9%. The decrease was primarily due
to a lower demand for semiconductor related products.
Cost of Sales, Excluding Depreciation. Cost of
sales, excluding depreciation, in the fiscal three-month period ended
March 30, 2008 was $433.1 million, compared to $409.2 million for the
same period in 2007, an increase of 5.8%. The increase was primarily due
to inflation on raw materials, energy and labor costs, offset by
inventory fair value step up costs related to purchase accounting of
$23.4 million recorded in 2007. In addition, cost of sales was impacted
by the sales volume noted above and changes in foreign currency exchange
rates.
Gross Profit. Gross profit in the fiscal three-month
period ended March 30, 2008 was $223.5 million, compared to $199.0
million for the same period in 2007, an increase of 12.3%. The increase
was primarily due to growth in net sales, partially offset by the
increased cost of sales.
Covenant Compliance
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 (subject to certain exceptions)
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. The Company is
in compliance with the covenant requirements at March 30, 2008.
Financial Measures that Supplement 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 as described in the table and footnotes
below, permitted in calculating covenant compliance in the indentures
governing the notes and the credit agreement governing our credit
facilities 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, which are non-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 to EBITDA and Adjusted EBITDA
for the periods presented:
= = = = = = = = = = =
Fiscal three-month period ended
- - - - - -
- - - - - -
March 30, 2008
April 1, 2007
- - - - - -
- - - - - -
(dollars in millions)
- - - - - -
- - - - - -
Net Loss
$
(48.9
)
$
(57.3
)
- - - - - -
Interest expense, net
67.0
68.1
- - - - - -
Income taxes
10.5
(2.7
)
- - - - - -
Depreciation and amortization
56.0
59.9
- - - - - -
- - - - - -
EBITDA
$
84.6
$
68.0
- - - - - -
- - - - - -
Minority Interest
(a)
$
0.1
$
-
- - - - - -
Non Cash, Purchase accounting effects
(b)
-
23.4
- - - - - -
Stand-alone savings - assessment
(c)
1.8
(1.7
)
- - - - - -
Cost savings - new initiatives
(d)
6.2
1.9
- - - - - -
Restructuring and other costs
(e)
4.3
5.6
- - - - - -
Transaction and initial costs
(f)
8.9
6.2
- - - - - -
- - - - - -
Adjusted EBITDA
$
105.9
$
103.4
- - - - - -
(a) Reflects the elimination of minority interests resulting from the
Shenzhen joint venture.
(b) Represents non-cash charges in cost of sales during the fiscal
three-month period ended April 1, 2007 resulting from the sales of
inventories revalued at fair value through purchase accounting at the
date of the Acquisition.
(c) For the fiscal three-month period ended March 30, 2008, reflects
transition services provided by GE of $1.8 million. For the fiscal
three-month period ended April 1, 2007 reflects additional costs
required to achieve normalized stand alone functionality offset by $5.2
million of transition services provided by GE, as well as $4.1 million
of stand-alone cost incurred.
(d) Represents estimated cost savings from initiatives being implemented
by management, including headcount reductions, and indirect cost savings.
(e) Relates primarily to restructuring and non-recurring expenditures.
(f) For the fiscal three-month periods ended March 30, 2008 and April 1
2007, represents (i) non-cash mark-to-market revaluation of foreign
currency forward contracts, and gains or losses on revaluation of our
Euro denominated debt, (ii) management fee paid to Apollo, (iii)
stock-based compensation and (iv) other non-recurring costs.
Business Outlook
We anticipate that the combination of raw material inflation and volume
softness in key domestic markets will adversely impact our performance
in the second quarter. We will continue to work towards offsetting these
trends with further cost initiatives and price increases where
applicable.
