Momentive Performance Materials Inc. Reports 2006 Results



    WILTON, CONN., April 4 /CNW/ - 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:

    

                                   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
                              ----------- --------- --------- ------------
    

    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:

    

                        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
                                              ------------ -------
    

    (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.




For further information:

For further information: Momentive Performance Materials Inc. Diana
Sousa, +1 203-761-1994 diana.sousa@momentive.com

Organization Profile

MOMENTIVE PERFORMANCE MATERIALS INC.

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890