Third Quarter Highlights
- Net sales were $567 million, an increase of 1% year-over-year
- Net loss of $17 million compared with net loss of $32 million in the prior year period
- Segment EBITDA was $66 million, an increase of 61% year-over-year
- Operating cash flow was $77 million compared with $31 million in the first nine months of 2015
WATERFORD, N.Y. (November 8, 2016) - MPM Holdings Inc. (“Momentive” or the “Company”) (OTCQX: MPMQ) today announced results for the third quarter ended September 30, 2016.
“We are pleased to report solid third quarter results and continued progress on our ongoing transformation initiatives,” said Jack Boss, Chief Executive Officer and President. “Our results reflect solid operational performance and continued growth i our specialty silicones portfolio, despite a relatively weak global economic environment. Earlier this month, we completed an important first step at our Leverkusen facility as part of our journey to transform Momentive’s global siloxane footprint. We have now ceased siloxane production at Leverkusen and begun sourcing related intermediates under long-term third party contracts and from other Momentive global sites. We expect this initiative will provide for $10 million of savings on a run-rat basis and remain focused on making strategic investments in our leading specialty technologies and cost structure to drive longterm growth and profitability.”
Third Quarter 2016 Results
Net Sales. Net sales for the three months ended September 30, 2016 were $567 million, an increase of 1% compared with $559 million in the prior-year period. The increase in net sales was driven by higher silicone volumes and improved product mix,
partially offset by lower quartz sales.
Segment EBITDA. Segment EBITDA for the three months ended September 30, 2016 was $66 million, an increase of 61% compared with $41 million in the prior year period. The increase in Segment EBITDA was driven primarily by improve demand in electronics and silanes, production efficiencies, and raw material deflation in the silicones segment. See “Non-U.S. GAAP Measures” and Schedule 4 to this release for further information regarding Segment EBITDA for a reconciliation of Segment EBITDA to net (loss) income.
Following are net sales and Segment EBITDA by reportable segment for the third quarter ended September 30, 2016. Corporate is primarily corporate, general and administrative expenses that are not allocated to the operating segments, such as certain shared service and administrative functions.
Global Restructuring Program
As previously announced, Momentive has developed a global restructuring program that is expected to generate $35 million in annual savings. Through September 30, 2016, Momentive achieved $19 million of savings under this program and expects to deliver approximately $27 million of savings in fiscal year 2016. Momentive expects to fully implement its global restructuring program in the first half of 2017 and has accrued approximately $13 million of related expenses, of which approximately $10 million have been incurred to date.
Siloxane Production Transformation
Separate and distinct from the Company’s $35 million global restructuring program, Momentive is taking strategic actions to reduce its global siloxane manufacturing capacity. As an initial step, the Company is rationalizing its siloxane capacity at its Leverkusen facility and sourcing a portion of its siloxane requirements through long-term external supply agreements. This process was completed earlier this month and is expected to generate savings of approximately $10 million per annum on a run-rate basis. In connection with this initiative, the Company has accrued $3 million of related expenses, which it expects to incur over the next twelve months.
Liquidity and Balance Sheet
At September 30, 2016, Momentive had net debt, which is total debt less cash and cash equivalents, of approximately $1.0 billion. In addition, at September 30, 2016, Momentive had approximately $410 million in liquidity, including $201 million of unrestricted cash and cash equivalents and $209 million of availability under its senior secured asset-based revolving loan facility. Momentive expects to have adequate liquidity to fund its operations for the foreseeable future from cash on its balance sheet, cash flows provided by operating activities and amounts available for borrowings under the ABL Facility.
Momentive will host a teleconference to discuss third quarter ended September 30, 2016 results on Tuesday, November 8, 2016, at 10 a.m. Eastern Time. Interested parties are asked to dial-in approximately 10 minutes before the call begins at the following numbers:
U.S. Participants: (844) 309-6571
International Participants: + 1 (484) 747-6920
Participant Passcode: 74048012
Live Internet access to the call and presentation materials will be available through the Investor Relations section of the Company’s website: www.momentive.com. A replay of the call will be available for three weeks beginning at 2 p.m. Eastern Time on November 8, 2016. The playback can be accessed by dialing (855) 859-2056 (U.S.) and +1 (404) 537-3406 (International). The passcode is 74048012. A replay also will be available through the Investor Relations Section of the Company’s website.
Non-U.S. GAAP Measures
Segment EBITDA is defined as EBITDA (earnings before interest, income taxes, depreciation and amortization) adjusted for certain non-cash and certain other income and 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. Segment EBITDA should not be considered a substitute for net income (loss) or other results reported in accordance with accounting principles generally accepted in the United States (“GAAP”). Segment EBITDA may not be comparable to similarly titled measures reported by other companies. See Schedule 4 to this release for a reconciliation of Segment EBITDA to net (loss) income.
Adjusted EBITDA is defined as EBITDA adjusted for certain non-cash and certain non-recurring items and other adjustments calculated on a pro-forma basis, including the expected future cost savings from business optimization or other programs and the expected future impact of acquisitions, in each case as determined under the governing debt instrument. As the Company is highly leveraged, the Company believes that including the supplemental adjustments that are made to calculate Adjusted EBITDA provides additional information to investors about the Company’s ability to comply with its financial covenants and to obtain additional debt in the future. Adjusted EBITDA is not a defined term under GAAP. Adjusted EBITDA is not a measure of financial condition, liquidity or profitability, and should not be considered as an alternative to net income (loss) determined in accordance with GAAP or operating cash flows determined in accordance with GAAP. Additionally, Adjusted EBITDA is not intended to be a measure of free cash flow for management's discretionary use, as it does not take into account certain items such as interest and principal payments on the Company’s indebtedness, depreciation and amortization expense (because the Company uses capital assets, depreciation and amortization expense is a necessary element of the Company’s costs and ability to generate revenue), working capital needs, tax payments (because the payment of taxes is part of the Company’s operations, it is a necessary element of the Company’s costs and ability to operate), non-recurring expenses and capital expenditures. Fixed Charges under the indentures should not be considered as an alternative to interest expense. See Schedule 5 to this release for a reconciliation of net (loss) income to Adjusted EBITDA and the calculation of the Adjusted EBITDA to Fixed Charges ratio.
Forward-Looking and Cautionary Statements
Certain statements in this press release are forward-looking statements within the meaning of and made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements related to our transformation and restructuring activities, growth and productivity initiatives, anticipated cost savings, growth, and market recovery, and competitiveness. In addition, our management may from time to time make oral forward-looking statements. All statements, other than statements of historical facts, are forwardlooking statements. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “project," “plan,” “estimate,” “may,” “will,” “could,” “should,” “seek” or “intend” and similar expressions. Forward-looking statements reflect our current expectations and assumptions regarding our business, the economy and other future events and conditions 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 as discussed in the Risk Factors section of our most recent Annual Report on Form 10-K and our other filings with the Securities and Exchange Commission (the “SEC”). While we believe our assumptions are reasonable, we caution you against relying on any forward-looking statements as it is very difficult to predict the impact of known factors, and it is impossible for us to anticipate all factors that could affect our actual results. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: a weakening of global economic and financial conditions, interruptions in the supply of or increased cost of raw materials, changes in governmental regulations or interpretations thereof and related compliance and litigation costs, adverse rulings in litigation, significant work stoppages, difficulties with the realization of cost savings in connection with our global restructuring, transformation and strategic initiatives, including transactions with our affiliate, Hexion Inc., pricing actions by our competitors that could affect our operating margins, our ability to obtain additional financing, and the other factors listed in the Risk Factors section of our SEC filings. All forward-looking statements are expressly qualified in their entirety by this cautionary notice. The forward-looking statements made by us speak only as of the date on which they are made. Factors or events that could cause our actual results to differ may emerge from time to time. 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.
Momentive is a global leader in silicones and advanced materials, with a 75- plus year heritage of being first to market with performance applications that support and improve everyday life. Momentive delivers science-based solutions for major industries, by linking its custom technology platforms to allow the creation of unique solutions for customers. Additional information is available at www.momentive.com.
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(See Attached Financial Statements)