Momentive Performance Materials Inc. Reports Third Quarter 2007 Results



    WILTON, CONN., November 19 /CNW/ - Momentive Performance Materials Inc.
("Momentive" or "the Company") today reported its consolidated results for the
fiscal three-month period ended September 30, 2007. Highlights include:

    --  Net sales of $624.4 million compared to $615.6 million in the fiscal
three-month period ended October 1, 2006.

    --  Operating loss of $8.1 million versus operating income of $57.5
million in the fiscal three-month period ended October 1, 2006.

    --  Net loss of $74.5 million compared to net income of $17.8 million in
the fiscal three-month period ended October 1, 2006.

    --  Adjusted EBITDA of $115.9 million compared to Adjusted EBITDA of
$111.0 million in the fiscal three-month period ended October 1, 2006,
resulting in an Adjusted EBITDA for the Last Twelve Month (LTM) period ending
September 30, 2007 of $440.9 million.

    "We are pleased to report progress during the third quarter in our plans
for growing this organization as an integrated standalone global enterprise,
reflected in our EBITDA growth, positive cash flow from operations, and
working capital reductions." said Jonathan Rich, president & CEO. He added,
"We expect to continue to benefit from the success of our
technologically-advanced products and the sustained global growth of silicone
applications."

    In connection with the issuance of the third quarter 2007 financial
report of consolidated results, Momentive Performance Materials has restated
the first quarter financial report for fiscal period ended April 1, 2007 and
the second quarter financial report for the fiscal period ended July 1, 2007,
respectively. The first quarter financial report was restated to reflect a
$6.8 million decrease in cost of sales. The second quarter financial report
was restated to reflect a $6.8 million increase in cost of sales, $9.3 million
increase in depreciation expense and a $4.3 million reduction in tax expense.
The corrections have no effect on Adjusted EBITDA or the cash flows.
Additional details, pertaining to the above noted corrections, may be found in
the footnotes to the restated first and second quarter financial report.

    For more information, interested parties may participate in Momentive's
Third Quarter Results Earnings Conference Call on Monday, November 19, 2007 at
4:00 P.M. EST:

    
    U.S. Toll-Free:      866.543.6407
    Outside of the U.S.: +1.617.213.8898
    Password:            76621836
    

    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 Annual Report to bondholders for the year ended December 31,
2006. 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 and
combined financial information for the fiscal three-month period ended
September 30, 2007:

    
                                            Successor        Predecessor
                                        ------------------ ---------------
                                              (dollars in millions)
                                        ----------------------------------
                                         Fiscal three-month period ended
                                        September 30, 2007 October 1, 2006

    Net sales                            $ 624.4   100.0%  $615.6  100.0%
    Cost of sales                          395.4    63.3%   397.5   64.6%
                                        ------------------ ---------------
    Gross profit                           229.0    36.7%   218.1   35.4%

    Selling, general and administrative
     expenses                              207.3    33.2%   139.9   22.7%
    Research and development expenses       18.8     3.0%    20.7    3.4%
    In-process research and development        -       -        -      -
    Restructuring and other costs           11.0     1.8%       -    0.0%
                                        ------------------ ---------------
    Operating income                        (8.1)   (1.3)%   57.5    9.3%
    Other income (expenses):
     Interest expense, net                 (70.5)  (11.3)%   (1.5)  (0.2)%
     Other income (expense), net             2.9     0.5%    (0.6)  (0.1)%
     Minority interests                      0.2     0.0%   (14.2)  (2.3)%
                                        ------------------ ---------------
    Income (loss) before income taxes      (75.5)  (12.1)%   41.2    6.7%

    Income taxes (benefit)                  (1.0)   (0.2)%   23.4    3.8%
                                        ------------------ ---------------
    Net income (loss)                    $ (74.5)  (11.9)% $ 17.8    2.9%
                                        ------------------ ---------------

    Net Sales by Segment
     Silicones                           $ 562.3    90.1%  $547.5   88.9%
     Quartz                              $  62.1     9.9%  $ 68.1   11.1%
                                        ------------------ ---------------
     Total                               $ 624.4   100.0%  $615.6  100.0%
                                        ------------------ ---------------
    

    Net sales. Net sales in the fiscal three-month period ended September 30,
2007 were $624.4 million, compared to $615.6 million for the same period in
2006, an increase of 1.4%. The increase was primarily due to an increase in
selling prices and exchange rate fluctuations offset by a decrease in sales
volume of 0.7%.

    Cost of sales. Cost of sales in the fiscal three-month period ended
September 30, 2007 were $395.4 million, compared to $397.5 million for the
same period in 2006, a decrease of 0.5%. The decrease was primarily due to
cost reduction programs and favorable product mix.

    Gross Profit. Gross profit in the fiscal three-month period ended
September 30, 2007 was $229.0 million, compared to $218.1 million for the same
period in 2006, an increase of 5.0%. The increase is primarily due to the
effects described above in cost of sales.

    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
(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. The Company is in compliance with the covenant
requirements at September 30, 2007.

    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 as described in the table and
footnotes below, permitted in calculating covenant compliance in the
indentures governing the notes and the credit agreement. 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 Successor Predecessor
                              --------- ----------- --------- -----------

                               Fiscal three-month    Fiscal nine-month
                                   period ended          period ended

                              September October 1,  September October 1,
                               30, 2007     2006     30, 2007     2006
                              --------- ----------- --------- -----------



    Net income (loss)          $ (74.5)     $  17.8 $ (176.4)     $  46.9
    Interest expense, net         70.5          1.5    209.4         14.7
    Income taxes
     (benefit)                    (1.0)        23.4      7.8         61.7
    Depreciation and
     amortization                101.3         41.2    219.9        123.9
                              --------- ----------- --------- -----------

      EBITDA                   $  96.3      $  83.9 $  260.7      $ 247.2
                              --------- ----------- --------- -----------


    Minority interests    (a)        -         16.0        -         49.6
    Non-cash, purchase
     accounting effects   (b)     (0.8)           -     26.9            -
    Stand-alone cost
     adjustment           (c)      1.5          4.6      0.4         13.8
    U.S. benefit plan
     savings              (d)        -          1.1        -          3.2
    Cost savings - new
     initiatives          (e)        -          1.9      1.9          5.6
    Restructuring and
     stand alone costs    (f)     11.0            -     24.0          3.0
    Transaction and other
     costs                (g)      7.9          3.5     24.8          3.4
                              --------- ----------- --------- -----------
      Adjusted EBITDA          $ 115.9      $ 111.0 $  338.7      $ 325.8
                              --------- ----------- --------- -----------

                                           Predecessor & Successor
                                     ------------------------------------
                                                 Period from
                                      January 1, 2006   October 1, 2006
                                            to                 to
                                     December 31, 2006 September 30, 2007
                                     ------------------------------------



    Net income (loss)                      $    (36.9)        $   (260.2)
    Interest expense, net                        33.4              228.3
    Income taxes (benefit)                       55.6                1.7
    Depreciation and
     amortization                               180.4              276.4
                                     ----------------- ------------------

      EBITDA                               $    232.5         $    246.2
                                     ----------------- ------------------


    Minority interests           (a)             49.8                0.2
    Non-cash, purchase
     accounting effects          (b)             86.4              113.3
    Stand-alone cost adjustment  (c)             15.7                2.3
    U.S. benefit plan savings    (d)              4.0                0.8
    Cost savings - new
     initiatives                 (e)              7.4                3.7
    Restructuring and stand
     alone costs                 (f)             10.8               31.8
    Transaction and other costs  (g)             21.2               42.6
                                     ----------------- ------------------
      Adjusted EBITDA                      $    427.8         $    440.9
                                     ----------------- ------------------
    

    (a) Reflects the elimination of minority interests resulting from the
acquisition of the partner interest in joint ventures with Toshiba and Bayer
of $14.2 million in the fiscal three-month period ended October 1, 2006, $46.5
million for the nine-months ended October 1, 2006, and $44.9 million for the
year ended December 31, 2006 along with the consolidation of OSi Italy from
May 2006 to December 3, 2006.

    (b) For the fiscal nine-month period ended September 30, 2007 and the
year ended December 31, 2006, non cash charges of $26.9 million and $34.4
million, respectively, resulting from the sales of inventories revalued at
fair value through purchase accounting. For the fiscal year end December 31,
2006, represents non-cash charges outlined above and $52.0 million of
in-process research and development.

    (c) For the predecessor period during the year ended December 31, 2006
and the fiscal three-month period ended October 1, 2006, represents pro-forma
stand-alone cost savings for functions and services previously provided by GE.
These services were historically billed to us through an assessment and
related to services such as IT, finance, treasury, operations, research and
development, insurance, legal, and human resources. The assessment was $62.6
million for 2006. These assessments were discontinued at the time of the
Acquisition. For the fiscal three-month period ended September 30, 2007,
reflects transition services provided by GE of $3.0 million and stand-alone
cost incurred of $9.5 million.

    (d) Represents savings related to our U.S. benefit plans as compared to
the cost historically billed directly to us by GE.

    (e) Represents cost savings from initiatives which have been implemented
by management, including headcount reductions, reduction in the number of
legal entities, and consolidation of warehouses and offices.

    (f) Relates primarily to restructuring and start up costs.

    (g) For the fiscal three-month period ended, September 30, 2007,
represents (i) impact of management inventory optimization efforts (ii)
non-cash market to market revaluation of foreign exchange contracts, (iii)
management fee paid to Apollo, and (iv) other non-recurring costs. For the
fiscal three-month period ended October 1, 2006, reflects discontinuation of
royalty payments to Toshiba and other non-recurring charges. For the year
ended December 31, 2006, represents (i) non-cash charges of $14.9 million that
will not repeat including inventory reserves; (ii) other consulting fees and
services of $3.6 million and (iii) the discontinuation of royalty payments to
Toshiba of $2.7 million.




For further information:

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

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MOMENTIVE PERFORMANCE MATERIALS INC.

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