Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 8, 2018
 
 
MPM HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
 
Delaware
 333-201338
47-1756080
(State or other jurisdiction of
incorporation or organization)
(Commission File
Number)
(I.R.S. Employer
Identification No.)
 

MOMENTIVE PERFORMANCE MATERIALS INC.
(Exact name of registrant as specified in its charter)
 
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)

Not Applicable
(Former Name or Former Address, if Changed Since Last Report)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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))





Item 2.02 Results of Operations and Financial Condition

On May 8, 2018, MPM Holdings Inc. ("Momentive") issued a news release announcing its results for the first quarter ended March 31, 2018. A copy of the News Release is being furnished as Exhibit 99.1 to this current report.

Item 9.01 Financial Statements and Exhibits

(d)    Exhibits
Exhibit 99.1
 







SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, each of the Registrants has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
MPM HOLDINGS INC.
 
 
 
Date: May 08, 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 INDEX

Exhibit
 
Description
99.1
 
News Release dated May 8, 2018 titled “Momentive Announces First Quarter 2018 Results.”


Exhibit


Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12236604&doc=3
260 Hudson River Road
Waterford, NY 12188
momentive.com
NEWS
RELEASE

FOR IMMEDIATE RELEASE

Momentive Announces First Quarter 2018 Results

First Quarter Highlights:
Net sales of $657 million, a 21% increase year-over-year
Segment EBITDA of $94 million, a 36% increase year-over-year
Segment EBITDA margin of 14.3%, a 160bp increase year-over-year
NXT* capacity expansion has been completed and production will ramp up throughout 2018
Reduced net leverage1 to 3.7x as of March 31, 2018. Significant liquidity of $417 million

WATERFORD, N.Y. (May 8, 2018) - MPM Holdings Inc. (“Momentive” or the “Company”) (OTCQX: MPMQ) today announced results for the first quarter ended March 31, 2018.

“We are pleased to report another quarter of significant Segment EBITDA growth and margin expansion,” said Jack Boss, Chief Executive Officer and President. “These results were driven by strong end-market demand across our entire portfolio, particularly within our personal care, automotive and electronic end markets. Our continued earnings momentum demonstrates the success of our clearly defined competitive strategy focused on driving growth in higher-margin specialty applications and optimizing our basics business and cost structure.”

“In addition, we are excited about our new NXT* facility in Europe, which doubles our capacity in our fastest growing product line and enables state-of-the-art manufacturing capabilities on two continents. This will allow us to strengthen our leadership position in automotive tire applications and enable additional new product offerings.”

Mr. Boss concluded, “As we look out into 2018, we expect strong demand, solid and improving industry fundamentals, pricing tailwinds, and more material EBITDA contribution from the capital investments we have made in our specialty product portfolio over the last several years. Further, we have implemented broad based price increases across the entire product portfolio, which are expected to benefit fiscal year 2018 results. This, along with our recently announced $15 million restructuring initiative, should continue to drive considerable margin expansion.”

First Quarter 2018 Results

Net Sales. Net sales for the three months ended March 31, 2018 were $657 million, an increase of 21% compared with $544 million in the prior year. The increase was driven by volume gains across all of Momentive’s segments, which reflected the benefits of our strategic growth investments and increased demand in automotive, agriculture, personal care and industrial end markets, as well as pricing initiatives announced in the fourth quarter of 2017.

___________________________________________ 
1 Defined as total principal value of debt less cash and cash equivalents divided by Segment EBITDA




Net Income (Loss). Net income for the three months ended March 31, 2018 was $20 million compared with a net loss of $30 million in the prior year period.

Segment EBITDA. Segment EBITDA for the three months ended March 31, 2018 was $94 million, an increase of 36% compared with $69 million in the prior year period. The increase in Segment EBITDA was driven by operating leverage and the same factors that impacted revenue growth in the quarter, and partially offset by approximately $10 million of weather-related disruptions in January. Momentive expects about $5 million of the impact to reverse in the second half of 2018.

Segment Results

The following tables reflect net sales and Segment EBITDA by reportable segment for the first quarter ended March 31, 2018 and 2017. See “Non-U.S. GAAP Measures” and Schedule 4 to this release for further information regarding Segment EBITDA and for a reconciliation of net (loss) income to Segment EBITDA.

Net Sales (1):
(in millions)
    
 
Three Months Ended March 31,
 
2018
 
2017
Performance Additives
$
248

 
$
220

Formulated and Basic Silicones
357

 
275

Quartz Technologies
52

 
49

Total
$
657

 
$
544

(1) Intersegment sales are not significant and, as such, are eliminated within the selling segment.

Segment EBITDA:
(in millions)
    
 
Three Months Ended March 31,
 
2018
 
2017
Performance Additives
$
54

 
$
47

Formulated and Basic Silicones
41

 
24

Quartz Technologies
9

 
7

Corporate
(10
)
 
(9
)
Total
$
94

 
$
69


Global Restructuring Program and Siloxane Production Transformation
In March 2018, the Company announced a restructuring initiative totaling $15 million in estimated annual run rate cost reductions with approximately $8 million to be realized in 2018. The most recent initiative targets primarily selling, general, and administrative cost reductions. The Company expects net costs to achieve savings of approximately $10 million.





Momentive previously completed global restructuring programs and siloxane production transformation of its Leverkusen, Germany, facility that generated approximately $45 million in annual savings.

Liquidity and Balance Sheet
At March 31, 2018, Momentive had net debt, which is total debt less cash and cash equivalents, of approximately $1.1 billion. In addition, at March 31, 2018, Momentive had $417 million in liquidity, including $173 million of unrestricted cash and cash equivalents, and $244 million of availability under its senior secured asset-based revolving loan (“ABL”) facility (undrawn, with $56 million letters of credit outstanding). During the first quarter of 2018, Momentive extended the Company’s ABL Facility to March 2023 subject to the terms outlined in the Amendment Agreement and increased the commitments under the ABL Facility by $30 million for a total of $300 million. 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.

Earnings Call
Momentive will host a teleconference to discuss first quarter 2018 results on Tuesday, May 8, 2018, 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: (484) 747-6920
Participant Passcode: 8598993

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 May 8, 2018. The playback can be accessed by dialing (855) 859-2056 (U.S.) and +1 (404) 537-3406 (International). The passcode is 8598993. 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 (loss) income 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 net income (loss) to Segment EBITDA.

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. 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 (loss) income 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, the impact of work stoppage and other incidents on our operations 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 forward-looking 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, the impact of work stoppage and other incidents on our operations, changes in governmental regulations or interpretations thereof and related compliance and litigation costs, adverse rulings in litigation, difficulties with the realization of our cost savings in connection with transformation and strategic initiatives, including transactions with our affiliate, Hexion Inc., pricing actions by our competitors that could affect our operating margins, the impact of our growth and productivity investments, our ability to realize the benefits there from, and the timing thereof, 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.

About Momentive





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.

Contact
Media and Investors:
John Kompa
614-225-2223
john.kompa@momentive.com
*NXT is a trademark of Momentive Performance Materials Inc.
 
(See Attached Financial Statements)







MPM HOLDINGS INC.
SCHEDULE 1: CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)



 
 
Three Months Ended March 31,
(In millions)
 
2018
 
2017
Net sales
 
$
657

 
$
544

Cost of sales
 
503

 
446

Gross profit
 
154

 
98

Costs and expenses:
 
 
 
 
Selling, general and administrative expense
 
86

 
83

Research and development expense
 
17

 
15

Restructuring and discrete costs
 
1

 
5

Other operating expense (income), net
 
1

 
3

Operating income (loss)
 
49

 
(8
)
Interest expense, net
 
20

 
19

Non-operating expense (income), net
 
3

 
2

Reorganization items, net
 
1

 

Income (loss) before income taxes and earnings from unconsolidated entities
 
25

 
(29
)
Income tax expense
 
6

 
1

Income (loss) before earnings from unconsolidated entities
 
19

 
(30
)
Earnings from unconsolidated entities, net of taxes
 
1

 

Net income (loss)
 
$
20

 
$
(30
)






MPM HOLDINGS INC.
SCHEDULE 2: CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

(In millions, except share data)
March 31, 2018
 
December 31, 2017
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents (including restricted cash of $1 at both March 31, 2018 and December 31, 2017)
$
174

 
$
174

Accounts receivable (net of allowance for doubtful accounts of $4 at both March 31, 2018 and December 31, 2017)
391

 
323

Inventories:
 
 
 
Raw materials
164

 
153

Finished and in-process goods
315

 
292

Other current assets
49

 
51

Total current assets
1,093

 
993

Investment in unconsolidated entities
20

 
19

Deferred income taxes
11

 
11

Other long-term assets
16

 
11

Property, plant and equipment:
 
 
 
Land
81

 
77

Buildings
349

 
338

Machinery and equipment
1,174

 
1,135

 
1,604

 
1,550

Less accumulated depreciation
(416
)
 
(383
)
 
1,188

 
1,167

Goodwill
220

 
216

Other intangible assets, net
297

 
300

Total assets
$
2,845

 
$
2,717

Liabilities and Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
323

 
$
286

Debt payable within one year
36

 
36

Interest payable
25

 
12

Income taxes payable
8

 
7

Accrued payroll and incentive compensation
83

 
68

Other current liabilities
97

 
103

Total current liabilities
572

 
512

Long-term liabilities:
 
 
 
Long-term debt
1,198

 
1,192

Pension and postretirement benefit liabilities
341

 
335

Deferred income taxes
60

 
60

Other long-term liabilities
75

 
74

Total liabilities
2,246

 
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 March 31, 2018 and December 31, 2017, respectively

 

Additional paid-in capital
869

 
868

Accumulated other comprehensive income (loss)
16

 
(18
)
Accumulated deficit
(286
)
 
(306
)
Total equity
599

 
544

Total liabilities and equity
$
2,845

 
$
2,717







MPM HOLDINGS INC.
SCHEDULE 3: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
 
Three Months Ended March 31,
(In millions)
2018
 
2017
Cash flows provided by (used in) operating activities
 
 
 
Net income (loss)
$
20

 
$
(30
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
40

 
38

Unrealized actuarial losses from pensions and other post retirement liabilities

 
1

Deferred income tax benefit
(2
)
 
(5
)
Unrealized foreign currency losses
3

 

Amortization of debt discount and ABL deferred financing costs
6

 
6

Stock based compensation
1

 
1

Loss due to impaired and scrapped assets

 
3

Other non-cash adjustments
(1
)
 

Net change in assets and liabilities:
 
 
 
Accounts receivable
(62
)
 
(32
)
Inventories
(26
)
 

Accounts payable
37

 
(1
)
Income taxes payable
1

 
(3
)
Other assets, current and non-current
4

 
2

Other liabilities, current and non-current
15

 
3

Net cash provided by (used in) operating activities
36

 
(17
)
Cash flows used in investing activities
 
 
 
Capital expenditures
(35
)
 
(37
)
Purchase of a business

 
(9
)
Net cash used in investing activities
(35
)
 
(46
)
Cash flows used in financing activities
 
 
 
Net short-term debt repayments
(1
)
 

ABL financing fees
(4
)
 

Net cash used in financing activities
(5
)
 

Decrease in cash, cash equivalents, and restricted cash
(4
)
 
(63
)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash
4

 
2

Cash, cash equivalents, and restricted cash at beginning of period
174

 
228

Cash, cash equivalents, and restricted cash at end of period
$
174

 
$
167

Supplemental disclosures of cash flow information
 
 
 
Cash paid for:
 
 
 
Interest
$
1

 
$
1

Income taxes, net of refunds
7

 
9

Non-cash investing activity:
 
 
 
Capital expenditures included in accounts payable
$
16

 
$
18







MPM HOLDINGS INC.
SCHEDULE 4: RECONCILIATION OF NET INCOME (LOSS) TO SEGMENT EBITDA (Unaudited)

 
Three Months Ended March 31,
 
2018
 
 
2017
Net income (loss)
$
20

 
 
$
(30
)
Interest expense, net
20

 
 
19

Income tax expense
6

 
 
1

Depreciation and amortization
40

 
 
38

 
 
 
 
 
Items not included in Segment EBITDA:
 
 
 
 
Non-cash charges and other income and expense
$
6

 
 
$
6

Unrealized losses on pension and postretirement benefits

 
 
1

Restructuring and discrete costs
1

 
 
34

Reorganization items, net
1

 
 

Segment EBITDA
$
94

 
 
$
69







MOMENTIVE PERFORMANCE MATERIALS INC.
SCHEDULE 5: RECONCILIATION OF LAST TWELVE MONTHS NET LOSS TO ADJUSTED EBITDA (Unaudited)

 
March 31, 2018
 
LTM Period
Net income
$
50

Interest expense, net
81

Income tax expense
20

Depreciation and amortization
156

EBITDA
307

Adjustments to EBITDA
 
Restructuring and discrete costs(a)
3

Reorganization items, net(b)
2

Unrealized gains on pension and postretirement benefits (c)
(6
)
Pro forma cost savings (d)
15

Non-cash charges (e)
12

Adjusted EBITDA (f)
$
333

Adjusted EBITDA less Capital Expenditures and Cash Taxes
$
144

Pro forma fixed charges(g)
56

Ratio of Adjusted EBITDA to Fixed Charges(h)
5.95

Pro forma Fixed Charge Coverage Ratio(i)
2.57


(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)
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.
(f)
Effective Quarter ended September 30, 2017, Nantong, China subsidiary is no longer designated as Unrestricted Subsidiary under the ABL Facility and the indentures that govern our notes, resulting in an increase of $7 million in adjusted EBITDA.
(g)
Reflects pro forma interest expense based on outstanding indebtedness and interest rates at March 31, 2018 adjusted for applicable restricted payments.
(h)
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 March 31, 2018, we were able to satisfy this test and incur additional indebtedness under these indentures.
(i)
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.