Momentive Specialty Chemicals reports increased net income of $116 million in 3Q 2010

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Momentive Specialty Chemicals reports increased net income of $116 million in 3Q 2010

November 02, 2010 - 23:34
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COLUMBUS, OH, Nov. 3, 2010 (Business Wire) -Momentive Specialty Chemicals Inc. ("Momentive Specialty Chemicals" or the "Company"), formerly known as Hexion Specialty Chemicals, Inc., today announced results for the third quarter ended September 30, 2010. Results for the third quarter of 2010 include:
  • Revenues of $1.4 billion in the third quarter of 2010 compared to $1.08 billion during the prior year period as sales continued to increase primarily due to volume gains, pricing actions and the contractual pass through of higher raw material costs, partially offset by the negative impact of foreign currency translation.
  • Operating income of $189 million for the third quarter of 2010 compared to operating income of $77 million for the prior year period. Third quarter 2010 operating income improved compared to the prior year primarily due to higher revenues, lower expenses and an improved cost structure resulting from the Company's ongoing productivity program.
  • Net income of $116 million for the third quarter of 2010 versus net income of $60 million in the prior year period. Third quarter 2010 results reflected the same factors impacting operating income.
  • Segment EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $202 million in the third quarter of 2010 compared to $128 million during the prior year period. (Note: Segment EBITDA is a non-GAAP financial measure and is defined and reconciled to Net Income (Loss) later in this release. In addition, the Company reported Pro Forma Adjusted EBITDA for the last twelve months of $691 million, including savings of approximately $50 million that the Company expects to achieve in connection with the shared services agreement that it recently entered into with Momentive Performance Materials Inc.

"Our record third quarter 2010 Segment EBITDA reflected continued growth in our specialty products and aggressive cost control initiatives," said Craig O. Morrison, Chairman, President and CEO. "Third quarter 2010 volumes were six percent lower than our previous record quarter, which was the first quarter of 2007, but our segment EBITDA was approximately 19 percent higher compared to this 2007 quarter demonstrating operating leverage from our ongoing productivity program."

"In the third quarter of 2010, our significant year-over-year improvement in Segment EBITDA was driven by strength in our specialty epoxy, specialty phenolics, oilfield proppants, and certain international forest products businesses. Our base epoxy resins and our monomers businesses also continued to benefit from strong market demand and tight supply conditions during the third quarter of 2010, which we expect to continue into the fourth quarter of 2010."

Segment Results

Following are net sales and Segment EBITDA by reportable segment for the third quarter ended September 30, 2010. Segment EBITDA is defined as EBITDA adjusted to exclude certain non-cash and non-recurring expenses. Segment EBITDA is the primary performance measure used by the Company to evaluate operating results and allocate resources among segments. Segment EBITDA is also the profitability measure used in management and executive incentive compensation programs. Corporate and Other primarily represents certain corporate, general and administrative expenses that are not allocated to the segments. (Note: Segment EBITDA is defined and reconciled to Net Income (loss) later in this release.)

Nine Month 2010 Results

Sales for the first nine months of 2010 were $3.9 billion, a 31 percent increase compared to the first nine months of 2009. Volume increases across substantially all of our product lines drove the majority of the year-over-year sales increase. Operating income for the first nine months of 2010 totaled $394 million compared to $80 million in the first nine months of 2009. In the first nine months of 2010, operating income improved compared to the prior year primarily due to higher revenues, lower expenses and an improved cost structure resulting from the Company's ongoing productivity program. Momentive Specialty Chemicals posted net income of $161 million in the first nine months of 2010 compared to $120 million in the first nine months of 2009. Net income in the first nine months of 2009 included a gain of $223 million from the extinguishment of debt for amounts less than the face value of the debt securities.

Outlook

"Looking ahead, we expect normal seasonality to impact our fourth quarter 2010 results based on the trends we've historically experienced," Morrison said. "We also expect continued strength in volumes for specialty applications, including those serving alternative energy markets, in the fourth quarter of 2010. In addition, we were pleased to announce our refinancing activities in late October, which extends $533 million of our debt maturities from 2014 to 2020. We're excited to build on our third quarter 2010 results and look forward to serving a larger customer base going forward as one of the companies forming the new Momentive."