Delaware | 333-201338 | 47-1756080 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
Delaware | 333-146093 | 20-5748297 |
(State or other jurisdiction of incorporation or organization) | (Commission File Number) | (I.R.S. Employer Identification No.) |
260 Hudson River Road Waterford, NY 12188 | (518) 233-3330 | |
(Address of principal executive offices including zip code) | (Registrant’s telephone number, including area code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
MPM HOLDINGS INC. | ||
Date: February 8, 2018 | /s/ Erick R. Asmussen | |
Erick R. Asmussen | ||
Chief Financial Officer |
MOMENTIVE PERFORMANCE MATERIALS INC. | ||
/s/ Erick R. Asmussen | ||
Erick R. Asmussen | ||
Chief Financial Officer |
Exhibit | Description | |
99.1 | News Release dated February 8, 2018 titled “Momentive Announces Fourth Quarter and Fiscal Year 2017 Results.” |
260 Hudson River Road Waterford, NY 12188 momentive.com | NEWS RELEASE |
• | Net sales of $599 million, a 10% increase year-over-year |
• | Segment EBITDA of $83 million, a 28% increase year-over-year |
• | Segment EBITDA margin of 13.9%, a 190bp increase year-over-year |
• | NXT* capacity expansion has been completed and production will ramp up in first half of 2018 |
• | Implementing broad based pricing actions throughout portfolio |
• | Net sales of $2.3 billion, a 4% increase year-over-year |
• | Segment EBITDA of $293 million, a 23% increase year-over-year |
• | Segment EBITDA margin of 12.6%, a 190bp increase year-over-year |
• | Reduced net leverage1 by 0.7x during FY 2017 to 4.0x as of December 31, 2017 |
• | Maintained significant financial flexibility while investing for growth. Liquidity of $387 million |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Performance Additives | $ | 230 | $ | 211 | $ | 900 | $ | 849 | |||||||
Formulated and Basic Silicones | 319 | 287 | 1,229 | 1,212 | |||||||||||
Quartz Technologies | 50 | 46 | 202 | 172 | |||||||||||
Total | $ | 599 | $ | 544 | $ | 2,331 | $ | 2,233 |
Three Months Ended December 31, | Twelve Months Ended December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Performance Additives | $ | 48 | $ | 48 | $ | 188 | $ | 187 | |||||||
Formulated and Basic Silicones | 34 | 20 | 105 | 70 | |||||||||||
Quartz Technologies | 10 | 7 | 40 | 20 | |||||||||||
Corporate | (9 | ) | (10 | ) | (40 | ) | (39 | ) | |||||||
Total | $ | 83 | $ | 65 | $ | 293 | $ | 238 |
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||
(In millions) | 2017 | 2016 | 2017 | 2016 | ||||||||||||
Net sales | $ | 599 | $ | 544 | $ | 2,331 | $ | 2,233 | ||||||||
Cost of sales | 453 | 474 | 1,831 | 1,845 | ||||||||||||
Gross profit | 146 | 70 | 500 | 388 | ||||||||||||
Selling, general and administrative expense | 81 | 109 | 333 | 347 | ||||||||||||
Research and development expense | 16 | 14 | 64 | 64 | ||||||||||||
Restructuring and discrete costs | — | 31 | 6 | 42 | ||||||||||||
Other operating loss (income), net | 7 | 9 | 9 | 19 | ||||||||||||
Operating income (loss) | 42 | (93 | ) | 88 | (84 | ) | ||||||||||
Interest expense, net | 20 | 19 | 80 | 76 | ||||||||||||
Non-operating (income) expense, net | (1 | ) | (9 | ) | (8 | ) | (7 | ) | ||||||||
Gain on extinguishment of debt | — | — | — | (9 | ) | |||||||||||
Reorganization items, net | 1 | 1 | 1 | 2 | ||||||||||||
Income (loss) before income taxes and earnings from unconsolidated entities | 22 | (104 | ) | 15 | (146 | ) | ||||||||||
Income tax expense | 4 | 14 | 15 | 18 | ||||||||||||
Income (loss) before earnings from unconsolidated entities | 18 | (118 | ) | — | (164 | ) | ||||||||||
Earnings from unconsolidated entities, net of taxes | 1 | — | — | 1 | ||||||||||||
Net income (loss) | 19 | (118 | ) | — | (163 | ) |
(In millions, except share data) | December 31, 2017 | December 31, 2016 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents (including restricted cash of $1 and $4 at December 31, 2017 and 2016, respectively) | $ | 174 | $ | 228 | |||
Accounts receivable (net of allowance for doubtful accounts of $4 at both December 31, 2017 and 2016) | 323 | 280 | |||||
Inventories: | |||||||
Raw materials | 153 | 119 | |||||
Finished and in-process goods | 292 | 271 | |||||
Other current assets | 51 | 50 | |||||
Total current assets | 993 | 948 | |||||
Investment in unconsolidated entities | 19 | 20 | |||||
Deferred income taxes | 11 | 9 | |||||
Other long-term assets | 11 | 20 | |||||
Property and equipment: | |||||||
Land | 77 | 74 | |||||
Buildings | 338 | 307 | |||||
Machinery and equipment | 1,135 | 959 | |||||
1,550 | 1,340 | ||||||
Less accumulated depreciation | (383 | ) | (265 | ) | |||
1,167 | 1,075 | ||||||
Goodwill | 216 | 211 | |||||
Other intangible assets, net | 300 | 323 | |||||
Total assets | $ | 2,717 | $ | 2,606 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 286 | $ | 238 | |||
Debt payable within one year | 36 | 36 | |||||
Interest payable | 12 | 11 | |||||
Income taxes payable | 7 | 8 | |||||
Accrued payroll and incentive compensation | 68 | 61 | |||||
Other current liabilities | 108 | 123 | |||||
Total current liabilities | 517 | 477 | |||||
Long-term liabilities: | |||||||
Long-term debt | 1,192 | 1,167 | |||||
Pension liabilities | 335 | 341 | |||||
Deferred income taxes | 60 | 66 | |||||
Other long-term liabilities | 69 | 73 | |||||
Total liabilities | 2,173 | 2,124 | |||||
Equity | |||||||
Common stock - $0.01 par value; 70,000,000 shares authorized; 48,121,634 and 48,058,114 shares issued and outstanding at December 31, 2017 and 2016, respectively | — | — | |||||
Additional paid-in capital | 868 | 864 | |||||
Accumulated other comprehensive loss | (18 | ) | (76 | ) | |||
Accumulated deficit | (306 | ) | (306 | ) | |||
Total equity | 544 | 482 | |||||
Total liabilities and equity | $ | 2,717 | $ | 2,606 |
(In millions) | Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||
Cash flows provided by operating activities | |||||||
Net income (loss) | $ | — | $ | (163 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 154 | 185 | |||||
Gain on insurance proceeds received for capital | (9 | ) | — | ||||
Gain on the extinguishment of debt | — | (9 | ) | ||||
Amortization of debt discount | 25 | 23 | |||||
Unrealized actuarial (gains) losses | (5 | ) | 33 | ||||
Deferred income tax benefit | (9 | ) | (17 | ) | |||
Stock-based compensation expense | 4 | 3 | |||||
Unrealized foreign currency gains | (6 | ) | (3 | ) | |||
Loss due to impaired and scrapped assets | 14 | 20 | |||||
Other non-cash adjustments | — | (1 | ) | ||||
Net change in assets and liabilities: | |||||||
Accounts receivable | (30 | ) | 11 | ||||
Inventories | (36 | ) | (12 | ) | |||
Accounts payable | 41 | 8 | |||||
Income taxes payable | 1 | 7 | |||||
Other assets, current and non-current | 8 | (15 | ) | ||||
Other liabilities, current and non-current | (39 | ) | 72 | ||||
Net cash provided by operating activities | 113 | 142 | |||||
Cash flows used in investing activities | |||||||
Capital expenditures | (170 | ) | (117 | ) | |||
Purchases of intangible assets | (2 | ) | (2 | ) | |||
Capital reimbursed from insurance proceeds | 9 | — | |||||
Purchase of a business | (9 | ) | — | ||||
Change in restricted cash | 3 | — | |||||
Dividend from MPM | 1 | 1 | |||||
Proceeds from sale of assets | — | 1 | |||||
Net cash used in investing activities | (168 | ) | (117 | ) | |||
Cash flows used in financing activities | |||||||
Net short-term debt repayments | (1 | ) | — | ||||
Repayments of long-term debt | — | (16 | ) | ||||
Net cash used in financing activities | (1 | ) | (16 | ) | |||
Increase (decrease) in cash and cash equivalents | (56 | ) | 9 | ||||
Effect of exchange rate changes on cash | 5 | (2 | ) | ||||
Cash and cash equivalents, beginning of period | 224 | 217 | |||||
Cash and cash equivalents, end of period | $ | 173 | $ | 224 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid for: | |||||||
Interest | $ | 57 | $ | 56 | |||
Income taxes, net of refunds | 24 | 27 | |||||
Non-cash investing activity: | |||||||
Capital expenditures included in accounts payable | $ | 23 | $ | 25 |
Quarter Ended December 31, | Year Ended December 31, | |||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||
Net income (loss) | $ | 19 | $ | (118 | ) | $ | — | $ | (163 | ) | ||||||||
Interest expense, net | 20 | 19 | 80 | 76 | ||||||||||||||
Income tax expense | 4 | 14 | 15 | 18 | ||||||||||||||
Depreciation and amortization | 37 | 53 | 154 | 185 | ||||||||||||||
Gain on extinguishment and exchange of debt | — | — | — | (9 | ) | |||||||||||||
Items not included in Segment EBITDA: | ||||||||||||||||||
Non-cash charges and other income and expense | $ | 8 | $ | 11 | $ | 12 | $ | 26 | ||||||||||
Unrealized (gains) losses on pension and postretirement benefits | (6 | ) | 28 | (5 | ) | 33 | ||||||||||||
Restructuring and discrete costs | — | 57 | 36 | 70 | ||||||||||||||
Reorganization items, net | 1 | 1 | 1 | 2 | ||||||||||||||
Segment EBITDA | $ | 83 | $ | 65 | $ | 293 | $ | 238 |
December 31, 2017 | |||
LTM Period | |||
Net income | $ | 1 | |
Interest expense, net | 80 | ||
Income tax expense | 15 | ||
Depreciation and amortization | 154 | ||
EBITDA | 250 | ||
Adjustments to EBITDA | |||
Restructuring and discrete costs(a) | 36 | ||
Reorganization items, net(b) | 1 | ||
Unrealized gains on pension and postretirement benefits (c) | (5 | ) | |
Pro forma cost savings (d) | 3 | ||
Acquisitions (e) | 1 | ||
Non-cash charges (f) | 12 | ||
Adjusted EBITDA (g) | $ | 298 | |
Adjusted EBITDA less Capital Expenditures and Cash Taxes | 113 | ||
Pro forma fixed charges(h) | $ | 56 | |
Ratio of Adjusted EBITDA to Fixed Charges(i) | 5.32 | ||
Pro forma Fixed Charge Coverage Ratio(j) | 2.02 |
(a) | Primarily includes expenses related to our global restructuring program, siloxane production transformation, work stoppage and certain other non-operating income and expenses. |
(b) | Represents professional fees related to our reorganization. |
(c) | Represents non-cash actuarial gains resulting from pension and postretirement liability curtailment and re-measurements. |
(d) | Represents estimated cost savings, on a pro forma basis, from initiatives implemented or being implemented by management. |
(e) | Reflects pro forma unrealized EBITDA related to Momentive’s acquisition of the operating assets of Sea Lion Technology, Inc. as if the business was acquired at the beginning of the LTM period. |
(f) | Non-cash charges primarily include the effects of foreign exchange gains and losses and impacts of asset impairments and disposals, and stock-based compensation expense. |
(g) | Effective September 30, 2017, our Nantong, China subsidiary was no longer designated as an Unrestricted Subsidiary under the ABL Facility and the indentures that govern our notes, resulting in an increase of $16 million in Adjusted EBITDA. |
(h) | Reflects pro forma interest expense based on outstanding indebtedness and interest rates at December 31, 2017 adjusted for applicable restricted payments. |
(i) | MPM’s ability to incur additional indebtedness, among other actions, is restricted under the indentures governing our notes, unless MPM has an Adjusted EBITDA to Fixed Charges ratio of at least 2.0 to 1.0. As of December 31, 2017, we were able to satisfy this test and incur additional indebtedness under these indentures. |
(j) | Represents Pro forma Fixed Charge Coverage Ratio (the “FCCR”) as defined in the credit agreement for the ABL Facility. If the availability under the ABL Facility is less than the greater of (a) 12.5% of the lesser of the borrowing base and the total ABL Facility commitments at such time and, (b) $27 million, then the FCCR must be greater than 1.0 to 1.0. |
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