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: November 9, 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 November 9, 2018 titled “Momentive Announces Third Quarter 2018 Results.” |
![]() | 260 Hudson River Road Waterford, NY 12188 momentive.com | NEWS RELEASE |
• | Net sales of $687 million, a 16% increase year-over-year |
• | Segment EBITDA of $102 million, a 52% increase year-over-year |
• | Segment EBITDA margin of 14.8%, a 350bp increase year-over-year |
• | Entered into a definitive merger agreement whereby Momentive will be acquired in a transaction valued at approximately $3.1 billion, including the assumption of net debt, pension and OPEB liabilities. |
• | Reduced net leverage1 to 2.8x as of September 30, 2018 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Performance Additives | $ | 239 | $ | 223 | $ | 737 | $ | 670 | |||||||
Formulated and Basic Silicones | 395 | 320 | 1,151 | 910 | |||||||||||
Quartz Technologies | 53 | 51 | 160 | 152 | |||||||||||
Total | $ | 687 | $ | 594 | $ | 2,048 | $ | 1,732 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Performance Additives | $ | 47 | $ | 45 | $ | 151 | $ | 140 | ||||||||
Formulated and Basic Silicones | 51 | 20 | 155 | 71 | ||||||||||||
Quartz Technologies | 13 | 13 | 34 | 30 | ||||||||||||
Corporate | (9 | ) | (11 | ) | (31 | ) | (31 | ) | ||||||||
Total | $ | 102 | $ | 67 | $ | 309 | $ | 210 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
(In millions, except share and per share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net sales | $ | 687 | $ | 594 | $ | 2,048 | $ | 1,732 | ||||||||
Cost of sales | 528 | 473 | 1,562 | 1,378 | ||||||||||||
Gross profit | 159 | 121 | 486 | 354 | ||||||||||||
Costs and expenses: | ||||||||||||||||
Selling, general and administrative expense | 83 | 84 | 255 | 251 | ||||||||||||
Research and development expense | 17 | 17 | 52 | 48 | ||||||||||||
Restructuring and discrete costs | 8 | 6 | 11 | 6 | ||||||||||||
Other operating expense (income), net | 1 | (1 | ) | (1 | ) | 3 | ||||||||||
Operating income | 50 | 15 | 169 | 46 | ||||||||||||
Interest expense, net | 21 | 21 | 61 | 60 | ||||||||||||
Non-operating (income) expense, net | (4 | ) | (5 | ) | (7 | ) | (7 | ) | ||||||||
Reorganization items, net | 4 | — | 9 | — | ||||||||||||
Income (loss) before income taxes and earnings from unconsolidated entities | 29 | (1 | ) | 106 | (7 | ) | ||||||||||
Income tax expense | 12 | 6 | 31 | 11 | ||||||||||||
Income (loss) before earnings from unconsolidated entities | 17 | (7 | ) | 75 | (18 | ) | ||||||||||
Earnings from unconsolidated entities, net of taxes | 1 | (1 | ) | 2 | (1 | ) | ||||||||||
Net income (loss) | $ | 18 | $ | (8 | ) | $ | 77 | $ | (19 | ) |
MPM HOLDINGS INC. | |||||||
(In millions, except share data) | September 30, 2018 | December 31, 2017 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents (including restricted cash of $1 at both September 30, 2018 and December 31, 2017) | $ | 252 | $ | 174 | |||
Accounts receivable (net of allowance for doubtful accounts of $3 and $4 at September 30, 2018 and December 31, 2017, respectively) | 386 | 323 | |||||
Inventories: | |||||||
Raw materials | 172 | 153 | |||||
Finished and in-process goods | 292 | 292 | |||||
Other current assets | 52 | 51 | |||||
Total current assets | 1,154 | 993 | |||||
Investment in unconsolidated entities | 21 | 19 | |||||
Deferred income taxes | 10 | 11 | |||||
Other long-term assets | 14 | 11 | |||||
Property, plant and equipment: | |||||||
Land | 77 | 77 | |||||
Buildings | 376 | 338 | |||||
Machinery and equipment | 1,141 | 1,135 | |||||
1,594 | 1,550 | ||||||
Less accumulated depreciation | (459 | ) | (383 | ) | |||
1,135 | 1,167 | ||||||
Goodwill | 212 | 216 | |||||
Other intangible assets, net | 268 | 300 | |||||
Total assets | $ | 2,814 | $ | 2,717 | |||
Liabilities and Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 320 | $ | 286 | |||
Debt payable within one year | 36 | 36 | |||||
Interest payable | 25 | 12 | |||||
Income taxes payable | 11 | 7 | |||||
Accrued payroll and incentive compensation | 69 | 68 | |||||
Other current liabilities | 100 | 103 | |||||
Total current liabilities | 561 | 512 | |||||
Long-term liabilities: | |||||||
Long-term debt | 1,211 | 1,192 | |||||
Pension and postretirement benefit liabilities | 319 | 335 | |||||
Deferred income taxes | 62 | 60 | |||||
Other long-term liabilities | 72 | 74 | |||||
Total liabilities | 2,225 | 2,173 | |||||
Equity | |||||||
Common stock - $0.01 par value; 70,000,000 shares authorized; 48,163,690 and 48,121,634 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively | — | — | |||||
Additional paid-in capital | 871 | 868 | |||||
Accumulated other comprehensive income (loss) | (53 | ) | (18 | ) | |||
Accumulated deficit | (229 | ) | (306 | ) | |||
Total equity | 589 | 544 | |||||
Total liabilities and equity | $ | 2,814 | $ | 2,717 |
Nine Months Ended September 30, | |||||||
(In millions) | 2018 | 2017 | |||||
Cash flows provided by (used in) operating activities | |||||||
Net income (loss) | $ | 77 | $ | (19 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization | 120 | 117 | |||||
Gain on insurance proceeds received for capital | (3 | ) | — | ||||
Unrealized actuarial (gains) losses from pensions and other post retirement liabilities | (2 | ) | 1 | ||||
Deferred income tax expense (benefit) | 4 | (10 | ) | ||||
Unrealized foreign currency gains | (6 | ) | (4 | ) | |||
Amortization of debt discount and ABL deferred financing costs | 19 | 18 | |||||
Stock based compensation | 3 | 3 | |||||
Other non-cash adjustments | (2 | ) | 9 | ||||
Net change in assets and liabilities: | |||||||
Accounts receivable | (71 | ) | (40 | ) | |||
Inventories | (27 | ) | (20 | ) | |||
Accounts payable | 47 | 27 | |||||
Income taxes payable | 6 | — | |||||
Other assets, current and non-current | (2 | ) | (3 | ) | |||
Other liabilities, current and non-current | 6 | (33 | ) | ||||
Net cash provided by operating activities | 169 | 46 | |||||
Cash flows used in investing activities | |||||||
Capital expenditures | (84 | ) | (123 | ) | |||
Capital reimbursed from insurance proceeds | 3 | — | |||||
Purchases of intangible assets | (1 | ) | (2 | ) | |||
Dividend from MPM | 1 | 1 | |||||
Purchase of a business | — | (9 | ) | ||||
Net cash used in investing activities | (81 | ) | (133 | ) | |||
Cash flows used in financing activities | |||||||
Borrowings of short-term debt | 36 | 35 | |||||
Repayments of short-term debt | (36 | ) | (36 | ) | |||
ABL financing fees | (4 | ) | — | ||||
Net cash used in financing activities | (4 | ) | (1 | ) | |||
Increase (decrease) in cash, cash equivalents, and restricted cash | 84 | (88 | ) | ||||
Effect of exchange rate changes on cash, cash equivalents, and restricted cash | (6 | ) | 4 | ||||
Cash, cash equivalents, and restricted cash at beginning of period | 174 | 228 | |||||
Cash, cash equivalents, and restricted cash at end of period | $ | 252 | $ | 144 | |||
Supplemental disclosures of cash flow information | |||||||
Cash paid for: | |||||||
Interest | $ | 29 | $ | 30 | |||
Income taxes, net of refunds | 21 | 20 | |||||
Non-cash investing activity: | |||||||
Capital expenditures included in accounts payable | $ | 15 | $ | 25 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
(In millions) | 2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income (loss) | $ | 18 | $ | (8 | ) | $ | 77 | $ | (19 | ) | |||||||
Interest expense, net | 21 | 21 | 61 | 60 | |||||||||||||
Income tax expense | 12 | 6 | 31 | 11 | |||||||||||||
Depreciation and amortization | 40 | 42 | 120 | 117 | |||||||||||||
Items not included in Segment EBITDA: | |||||||||||||||||
Non-cash charges and other income and expense , net | $ | (1 | ) | $ | — | $ | 2 | $ | 4 | ||||||||
Unrealized (gains) losses on pension and postretirement benefits | — | — | (2 | ) | 1 | ||||||||||||
Restructuring and discrete costs | 8 | 6 | 11 | 36 | |||||||||||||
Reorganization items | 4 | — | 9 | — | |||||||||||||
Segment EBITDA | $ | 102 | $ | 67 | $ | 309 | $ | 210 |
September 30, 2018 | |||
(In millions) | LTM Period | ||
Net income | $ | 98 | |
Interest expense, net | 81 | ||
Income tax expense | 35 | ||
Depreciation and amortization | 157 | ||
EBITDA | 371 | ||
Adjustments to EBITDA | |||
Restructuring and discrete costs(a) | 11 | ||
Reorganization items, net(b) | 10 | ||
Unrealized gains on pension and postretirement benefits (c) | (8 | ) | |
Pro forma cost savings (d) | 11 | ||
Non-cash charges (e) | 9 | ||
Adjusted EBITDA | $ | 404 | |
Adjusted EBITDA less Capital Expenditures and Cash Taxes | $ | 251 | |
Pro forma fixed charges(f) | $ | 56 | |
Ratio of Adjusted EBITDA to Fixed Charges(g) | 7.21 | ||
Pro forma Fixed Charge Coverage Ratio(h) | 4.48 |
(a) | Primarily includes expenses related to our global restructuring program, siloxane production transformation, 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) | Includes primarily the effects of foreign exchange gains and losses and impacts of asset impairments and disposals, and stock-based compensation expense. |
(f) | Reflects pro forma interest expense based on outstanding indebtedness and interest rates at September 30, 2018 adjusted for applicable restricted payments. |
(g) | 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 September 30, 2018, we were able to satisfy this test and incur additional indebtedness under these indentures. |
(h) | 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, then the FCCR must be greater than 1.0 to 1.0. |
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