Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 3, 2011
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 333-146093
Momentive Performance Materials Inc.
(Exact name of registrant as specified in its charter)
Delaware | 20-5748297 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
22 Corporate Wood Blvd., 2nd Fl Albany, NY 12211 | (518) 533-4600 | |
(Address of principal executive offices including zip code) | (Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | o | Accelerated filer | o | |
Non-accelerated filer | x | Smaller Reporting Company | o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
The number of shares of common stock of the Company, par value $0.01 per share, outstanding as of the close of business on May 12, 2011 was 100 shares, all of which were held by Momentive Performance Materials Holdings Inc.
TABLE OF CONTENTS | ||
Page | ||
Part I | Financial Information | |
Item 1. | Financial Statements | |
Item 2. | ||
Item 3. | ||
Item 4. | ||
Part II | Other Information | |
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
2
MOMENTIVE PERFORMANCE MATERIALS INC.
Condensed Consolidated Balance Sheets (Unaudited)
(Dollar amounts in millions)
April 3, 2011 | December 31, 2010 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 210 | $ | 254 | |||
Receivables, net (note 4) | 425 | 385 | |||||
Due from affiliates | 8 | 4 | |||||
Inventories (note 5) | 428 | 375 | |||||
Prepaid expenses | 12 | 10 | |||||
Income tax receivable | 3 | 2 | |||||
Deferred income taxes (note 7) | 12 | 12 | |||||
Other current assets | 3 | 1 | |||||
Total current assets | 1,101 | 1,043 | |||||
Property and equipment (net of accumulated depreciation and amortization of $744 and $715 at April 3, 2011 and December 31, 2010, respectively) | 1,107 | 1,109 | |||||
Other long-term assets | 92 | 88 | |||||
Deferred income taxes (note 7) | 43 | 41 | |||||
Intangible assets (net of accumulated amortization of $196 and $176 at April 3, 2011 and December 31, 2010, respectively) | 590 | 586 | |||||
Goodwill | 432 | 425 | |||||
Total assets | $ | 3,365 | $ | 3,292 | |||
Liabilities and Deficit | |||||||
Current liabilities: | |||||||
Trade payables | $ | 311 | $ | 303 | |||
Short-term borrowings (note 6) | — | 2 | |||||
Accrued expenses and other liabilities | 176 | 170 | |||||
Accrued interest | 51 | 25 | |||||
Due to affiliates | 2 | 2 | |||||
Accrued income taxes | 11 | 10 | |||||
Deferred income taxes (note 7) | 24 | 13 | |||||
Current installments of long-term debt (note 6) | 20 | 25 | |||||
Total current liabilities | 595 | 550 | |||||
Long-term debt (note 6) | 2,989 | 2,952 | |||||
Other liabilities | 62 | 59 | |||||
Pension liabilities (note 9) | 280 | 272 | |||||
Deferred income taxes (note 7) | 63 | 63 | |||||
Total liabilities | 3,989 | 3,896 | |||||
Commitments and contingencies | |||||||
Deficit: | |||||||
Common stock | — | — | |||||
Additional paid-in capital | 603 | 603 | |||||
Accumulated deficit | (1,431 | ) | (1,428 | ) | |||
Accumulated other comprehensive income (note 8) | 201 | 217 | |||||
Total Momentive Performance Materials Inc.'s deficit | (627 | ) | (608 | ) | |||
Noncontrolling interests (note 8) | 3 | 4 | |||||
Total deficit | (624 | ) | (604 | ) | |||
Total liabilities and deficit | $ | 3,365 | $ | 3,292 |
See accompanying notes to condensed consolidated financial statements.
3
MOMENTIVE PERFORMANCE MATERIALS INC.
Condensed Consolidated Statements of Operations (Unaudited)
(Dollar amounts in millions)
Fiscal three-month period ended | |||||||
April 3, 2011 | March 28, 2010 | ||||||
Net sales | $ | 660 | $ | 605 | |||
Costs and expenses: | |||||||
Cost of sales, excluding depreciation | 417 | 377 | |||||
Selling, general and administrative expenses | 95 | 101 | |||||
Depreciation and amortization expenses | 50 | 47 | |||||
Research and development expenses | 20 | 16 | |||||
Restructuring and other costs (note 2(c)) | 5 | 1 | |||||
Operating income | 73 | 63 | |||||
Other income (expense): | |||||||
Interest expense, net | (64 | ) | (61 | ) | |||
Other income, net | — | — | |||||
Income before income taxes | 9 | 2 | |||||
Income taxes (note 7) | 12 | 5 | |||||
Net loss | (3 | ) | (3 | ) | |||
Net income attributable to the noncontrolling interest | — | — | |||||
Net loss attributable to Momentive Performance Materials Inc. | $ | (3 | ) | $ | (3 | ) |
See accompanying notes to condensed consolidated financial statements.
4
MOMENTIVE PERFORMANCE MATERIALS INC.
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollar amounts in millions)
Fiscal three-month period ended | |||||||
April 3, 2011 | March 28, 2010 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (3 | ) | $ | (3 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depreciation and amortization | 50 | 47 | |||||
Amortization of debt discount and issuance costs | 4 | 4 | |||||
Deferred income taxes | 9 | 1 | |||||
Stock-based compensation expense | — | — | |||||
Change in unrealized loss on derivative instruments | — | 1 | |||||
Changes in operating assets and liabilities: | |||||||
Receivables | (29 | ) | (50 | ) | |||
Inventories | (46 | ) | (14 | ) | |||
Due to/from affiliates | (4 | ) | 2 | ||||
Accrued income taxes | (1 | ) | — | ||||
Prepaid expenses and other assets | (10 | ) | — | ||||
Trade payables | 4 | 26 | |||||
Accrued expenses and other liabilities | 34 | 39 | |||||
Pension liabilities | 3 | 5 | |||||
Net cash provided by operating activities | 11 | 58 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (18 | ) | (11 | ) | |||
Purchases of intangible assets | (1 | ) | (1 | ) | |||
Net cash used in investing activities | (19 | ) | (12 | ) | |||
Cash flows from financing activities: | |||||||
Debt issuance costs | (5 | ) | — | ||||
Net decrease in short-term borrowings | (2 | ) | — | ||||
Proceeds from long-term debt | 37 | — | |||||
Payments of long-term debt | (55 | ) | (75 | ) | |||
Net cash used in financing activities | (25 | ) | (75 | ) | |||
Decrease in cash and cash equivalents | (33 | ) | (29 | ) | |||
Effect of exchange rate changes on cash | (11 | ) | 6 | ||||
Cash and cash equivalents, beginning of period | 254 | 210 | |||||
Cash and cash equivalents, end of period | $ | 210 | $ | 187 |
See accompanying notes to condensed consolidated financial statements.
5
MOMENTIVE PERFORMANCE MATERIALS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Dollar amounts in millions)
(1) | Business and Basis of Presentation |
Momentive Performance Materials Inc. (the Company or MPM) incorporated in Delaware on September 6, 2006 as a wholly-owned subsidiary of Momentive Performance Materials Holdings Inc. (MPM Holdings and together with its subsidiaries, the MPM Group) for the purpose of acquiring the assets and stock of various subsidiaries of General Electric Company (GE) that comprised GE’s Advanced Materials (GEAM or the Predecessor) business. The acquisition was completed on December 3, 2006 (the Acquisition). GEAM was comprised of two businesses, GE Silicones and GE Quartz, and was an operating unit within the Industrial segment of GE. On October 1, 2010, the newly formed holding companies of MPM Holdings and Momentive Specialty Chemicals Holdings LLC (formerly known as Hexion LLC), the parent company of Momentive Specialty Chemicals Inc. (formerly known as Hexion Specialty Chemicals, Inc.), merged, with the surviving entity renamed Momentive Performance Materials Holdings LLC. As a result of the merger, Momentive Performance Materials Holdings LLC (Holdings LLC) became the ultimate parent company of Momentive Performance Materials Inc. and Momentive Specialty Chemicals Inc. Holdings LLC is controlled by investment funds affiliated with Apollo Global Management, LLC.
The Company is comprised of two business segments, Silicones and Quartz. The Silicones segment (Silicones) is a global organization engaged in the manufacture, sale and distribution of silanes, specialty silicones and urethane additives. The Quartz segment (Quartz), also a global business, is engaged in the manufacture, sale and distribution of high-purity fused quartz and ceramic materials. The Company is headquartered in Albany, New York.
Momentive Performance Materials Inc. is comprised of the following legal entities and their wholly-owned subsidiaries: Momentive Performance Materials USA Inc.; Momentive Performance Materials Worldwide Inc.; Momentive Performance Materials China SPV Inc.; Juniper Bond Holdings I LLC; Juniper Bond Holdings II LLC; Juniper Bond Holdings III LLC; and Juniper Bond Holdings IV LLC.
In the Americas, Silicones has manufacturing facilities in Waterford, New York; Sistersville, West Virginia; New Smyrna Beach, Florida; Itatiba, Brazil; and custom elastomers compounding operations in Chino, California and Garrett, Indiana. In the Americas, Quartz manufactures in Strongsville, Ohio; Willoughby, Ohio; Richmond Heights, Ohio and Newark, Ohio. A majority of the manufacturing personnel in Waterford, New York; Sistersville, West Virginia and Willoughby, Ohio are covered by collective bargaining agreements.
Silicones has manufacturing facilities outside the Americas in Leverkusen, Germany; Nantong, China; Ohta, Japan; Rayong, Thailand; Shanghai, China; Shenzhen, China; Bergen op Zoom, Netherlands; Lostock, U.K.; Termoli, Italy; Antwerp, Belgium and Chennai, India. Quartz’ non-U.S. manufacturing facilities are located in Kozuki, Japan; Wuxi, China and Geesthacht, Germany. In Europe, employees at the Leverkusen, Bergen op Zoom, Termoli, and Geesthacht facilities are covered by collective bargaining agreements.
The collective bargaining agreements that cover the Willoughby, Ohio, Waterford, New York and Sistersville, West Virginia facilities expired in June 2010, June 2010 and July 2010, respectively. The Company reached agreement on new collective bargaining agreements for each of these facilities with terms extending into 2013. The Company does not have other significant collective bargaining agreements that will expire before the end of December 2011.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In accordance with Rule 10-01, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments, consisting only of normal, recurring adjustments, considered necessary for a fair presentation, have been included. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Results for the interim periods are not necessarily indicative of results for the full year. The balance sheet data as of December 31, 2010 was derived from audited consolidated financial statements as of December 31, 2010 but does not include all of the information and notes required by U.S. GAAP for complete financial statements.
We evaluated subsequent events through the date of financial statement issuance.
(2) | Summary of Significant Accounting Policies |
The following is an update of the significant accounting policies followed by the Company.
6
MOMENTIVE PERFORMANCE MATERIALS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
(Dollar amounts in millions)
(a) | Consolidation |
The condensed consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries as of April 3, 2011 and December 31, 2010, and for the fiscal three-month periods ended April 3, 2011 and March 28, 2010. Noncontrolling interests represent the noncontrolling shareholder’s proportionate share of the equity in the consolidated joint venture affiliates. All significant intercompany balances and transactions, including profit and loss as a result of those transactions, have been eliminated in the consolidation.
(b) | Income Taxes |
For the fiscal three-month periods ended April 3, 2011 and March 28, 2010, the Company’s provision for income taxes was calculated by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items such as the gain on exchange of debt). Discrete items are recorded in the period in which they are incurred.
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment dates. A valuation allowance is established, as needed, to reduce deferred tax assets to the amount expected to be realized.
(c) | Restructuring and Other Costs |
Included in restructuring and other costs are costs related to restructuring (primarily severance payments associated with workforce reductions), consulting services associated with transformation savings, and initial stand-alone activities.
For the fiscal three-month periods ended April 3, 2011 and March 28, 2010, the Company recognized restructuring of $2 and $0, respectively, and other costs of $3 and $1, respectively.
The following table sets forth the changes in the restructuring reserve, which is recorded in accrued expenses and other liabilities on the condensed consolidated balance sheets:
Silicones | Quartz | Total | |||||||||
Balance as of January 1, 2010 | $ | 8 | $ | 3 | $ | 11 | |||||
Additions | 3 | — | 3 | ||||||||
Cash payments | (8 | ) | (3 | ) | (11 | ) | |||||
Foreign currency translation adjustments | — | — | — | ||||||||
Balance as of December 31, 2010 | 3 | — | 3 | ||||||||
Additions | 2 | — | 2 | ||||||||
Cash payments | (1 | ) | — | (1 | ) | ||||||
Foreign currency translation adjustments | — | — | — | ||||||||
Balance as of April 3, 2011 | $ | 4 | $ | — | $ | 4 |
The restructuring costs above are primarily related to the MSC Transaction and are expected to be paid in 2011 and 2012.
(d) | Use of Estimates |
The preparation of the unaudited condensed consolidated financial statements requires management of the Company to make a number of estimates and assumptions relating to the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial
7
MOMENTIVE PERFORMANCE MATERIALS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
(Dollar amounts in millions)
statements and the reported amounts of revenues and expenses during the period. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangibles, valuation allowances for receivables, inventories, deferred income tax assets and assets and obligations related to employee benefits. Actual results could differ from those estimates.
(e) | Recently Issued Accounting Standards |
Changes to accounting principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial Accounting Standards Board (FASB) in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards Codification.
The Company considered the applicability and impact of all recently issued ASU’s and determined that they were either not applicable or are expected to have minimal impact on the consolidated financial position and results of operations.
(f) | Fair Value of Financial Instruments |
The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, trade payables, short-term borrowings and accrued expenses and other liabilities. Carrying amounts approximate fair value due to the short-term maturity of these instruments. The fair value of long-term debt is disclosed in Note 3.
(3) | Fair Value Measurements |
Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. A fair value hierarchy exists, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are:
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. | |
Level 2 | Quoted prices for similar assets or liabilities in active markets; or observable prices which are based on observable market data, based on, directly or indirectly market-corroborated inputs. The Company’s level 2 liabilities include interest rate swaps and natural gas derivative contracts that are traded in an active exchange market. | |
Level 3 | Unobservable inputs that are supported by little or no market activity and are developed based on the best information available in the circumstances. |
At April 3, 2011 and December 31, 2010, the Company had less than $1 of natural gas derivative contracts included in level 2. The fair value of the natural gas derivative contracts generally reflects the estimated amounts that the Company would receive or pay, on a pre-tax basis, to terminate the contracts and swap at the reporting date based on broker quotes for the same or similar instruments. Counterparties to these contracts are highly rated financial institutions, none of which experienced any significant downgrades in the fiscal three-month period ended April 3, 2011 that would reduce the fair value receivable amount owed, if any, to the Company.
At April 3, 2011, the Company estimates that the $1,372 of outstanding springing lien notes had a fair value of approximately $1,416; the $379 of outstanding fixed rate senior subordinated notes had a fair value of approximately $408; the $1,042 of outstanding variable rate term loans had a fair value of approximately $1,025; the $174 of outstanding fixed rate second-lien senior secured notes with a $200 aggregate principal amount had a fair value of approximately $222; and the fair value of the $5 outstanding medium term loan and the $37 outstanding fixed asset loan were approximately the same as their outstanding balances. The Company determined the estimated fair value amounts by using available market information for the senior notes and commonly accepted valuation methodologies for the term loans. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the fair value estimates presented herein are not necessarily indicative of the amount that the Company or the debt-holders could realize in a current market exchange. The use of different assumptions, changes in market conditions and/or estimation methodologies may have a material effect on the estimated fair value.
8
MOMENTIVE PERFORMANCE MATERIALS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
(Dollar amounts in millions)
(4) | Receivables, net |
Receivables consisted of the following at April 3, 2011 and December 31, 2010:
April 3, 2011 | December 31, 2010 | ||||||
Trade | $ | 380 | $ | 339 | |||
Other: | |||||||
VAT | 20 | 23 | |||||
Advances | 18 | 11 | |||||
Other | 11 | 15 | |||||
429 | 388 | ||||||
Allowance for doubtful accounts | (4 | ) | (3 | ) | |||
Total receivables, net | $ | 425 | $ | 385 |
(5) Inventories
Inventories consisted of the following at April 3, 2011 and December 31, 2010:
April 3, 2011 | December 31, 2010 | ||||||
Raw materials and work in process | $ | 141 | $ | 125 | |||
Finished goods | 287 | 250 | |||||
Total inventories | $ | 428 | $ | 375 |
(6) | Indebtedness |
(a) | Short-Term Borrowings |
At April 3, 2011 and December 31, 2010, the Company had short-term borrowings consisting of a loan from a former subsidiary of $0 and $2, respectively.
(b) | Long-Term Debt |
As of April 3, 2011, the Company had no outstanding borrowings under the revolving credit facility. The outstanding letters of credit under the revolving credit facility at April 3, 2011 were $45 leaving unused borrowing capacity of $255. Outstanding letters of credit issued under the synthetic letter of credit facility at April 3, 2011 were $32 leaving unused capacity of $2
At April 3, 2011, the Company was in compliance with the covenants of all long-term debt agreements.
On February 3, 2011, the Company entered into an amendment agreement (Amendment Agreement) to provide for the amendment of its Credit Agreement dated December 3, 2006 to, among other things: (i) extend the maturity of term loans held by consenting lenders to May 5, 2015 and increase the applicable margin with respect to such extended term loans to 3.50% per annum for eurocurrency loans, (ii) allow future mandatory and voluntary prepayments to be directed to non-extended term loans prior to the extended maturity term loans, (iii) subject to the requirement to make such offers on a pro rata basis to all term loan lenders and/or to all lenders holding revolving commitments, as applicable, allow the Company to extend the maturity of term loans and/or revolving commitments, as applicable, and for the Company to otherwise modify the terms of loans or revolving commitments in connection with such an extension and (iv) amend certain other terms therein.
Pursuant to the Amendment Agreement, lenders under the Credit Agreement agreed to extend the maturity of (i) approximately $437 aggregate principal amount of their dollar term loans (approximately 87% of the total dollar term loans) and (ii) approximately €298 aggregate principal amount of their euro term loans (approximately 78% of the total euro term loans), for an overall extension of approximately $846 aggregate US dollar equivalent principal amount of term loans (approximately 82% of the total term loans). The Amendment Agreement and the extension of the term loans thereunder became effective on February 10, 2011.
9
MOMENTIVE PERFORMANCE MATERIALS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
(Dollar amounts in millions)
In March 2011, Momentive Performance Materials Nantong Co. Ltd. (MPM Nantong) entered into a fixed asset loan agreement with Agricultural Bank of China (ABOC) providing for a loan of $37, which was funded on March 21, 2011. The loan is denominated in Chinese renminbi and collateralized by certain assets of MPM Nantong. The proceeds of this loan along with internal funds were used to fully pay the remaining amount outstanding due under MPM Nantong's construction loan with China Construction Bank of $51. Principal repayments on the new fixed asset loan agreement are due and payable in annual installments of $8 (subject to exchange rates) on December 31 of 2011 through 2014, with the remaining balance due on December 31, 2015. Interest on the loan is due quarterly and is based on 101% of the People's Bank of China reference rate. The interest rate on the loan as of April 3, 2011 was 6.52%. MPM Nantong also entered into two working capital loan agreements with ABOC in April and May, 2011 providing for revolving secured loans up to $15 (subject to exchange rates), none of which was outstanding as of April 3, 2011. These revolving loans, which are also denominated in Chinese renminbi, must be paid down and renewed annually and bear interest based on 105% of the People's Bank of China reference rate for loans with a one-year term.
(7) | Income Taxes |
The 2011 tax expense includes unfavorable discrete tax adjustments of $8 pertaining to foreign currency exchange gains in certain jurisdictions that generated tax expense and hedged currency exchange losses in other jurisdictions for which no net tax benefit is recognized due to a full valuation allowance in those jurisdictions, partially offset by the resolution of certain tax matters in the U.S. and non-U.S. jurisdictions.
The effective tax rate was 133% and 250% for the fiscal three-month periods ended April 3, 2011 and March 28, 2010, respectively. The change in the effective tax rate was primarily due the maintenance of a full valuation allowance against a substantial amount of the Company's net deferred tax assets, in addition to a change in the amount of income (loss) before income taxes and changes in the tax rates applied in the various jurisdictions in which the Company operates. The valuation allowance, which relates principally to the U.S. deferred tax assets, was established and maintained based on the Company's assessment that the net deferred tax assets will likely not be realized.
(8) | Comprehensive (Loss) Income |
The balances for each classification of comprehensive (loss) income are as follows:
Fiscal three-month period ended | |||||||
April 3, 2011 | March 28, 2010 | ||||||
Net loss | $ | (3 | ) | $ | (3 | ) | |
Foreign currency translation | (15 | ) | 15 | ||||
Other comprehensive income adjustments, net | (1 | ) | — | ||||
Comprehensive (loss) income | (19 | ) | 12 | ||||
Net income attributable to the noncontrolling interest | — | — | |||||
Foreign currency translation attributable to the noncontrolling interest | — | — | |||||
Comprehensive (loss) income attributable to Momentive Performance Materials Inc. | $ | (19 | ) | $ | 12 |
The following table details changes in equity (deficit), including changes in equity (deficit) attributable to the Momentive Performance Materials Inc. shareholder and changes in equity attributable to the noncontrolling interests:
10
MOMENTIVE PERFORMANCE MATERIALS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
(Dollar amounts in millions)
Total | Equity (deficit) attributable to Momentive Performance Materials Inc. shareholder | Equity attributable to noncontrolling Interest | |||||||||||||||||||||
Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive Income | ||||||||||||||||||||
Balance at January 1, 2011 | $ | (604 | ) | $ | — | $ | 603 | $ | (1,428 | ) | $ | 217 | $ | 4 | |||||||||
Stock option activity and other | — | — | — | — | — | — | |||||||||||||||||
Dividends paid to noncontrolling interest | (1 | ) | (1 | ) | |||||||||||||||||||
Dividends declared to Parent | — | — | — | — | — | — | |||||||||||||||||
Comprehensive income (loss): | — | ||||||||||||||||||||||
Net loss | (3 | ) | — | — | (3 | ) | — | — | |||||||||||||||
Foreign currency translation adjustment - net | (15 | ) | — | — | — | (15 | ) | — | |||||||||||||||
Other comprehensive income adjustments - net | (1 | ) | — | — | — | (1 | ) | — | |||||||||||||||
Balance at April 3, 2011 | $ | (624 | ) | $ | — | $ | 603 | $ | (1,431 | ) | $ | 201 | $ | 3 |
Total | Equity (deficit) attributable to Momentive Performance Materials Inc. shareholder | Equity attributable to noncontrolling Interest | |||||||||||||||||||||
Common stock | Additional paid-in capital | Accumulated deficit | Accumulated other comprehensive Income | ||||||||||||||||||||
Balance at January 1, 2010 | $ | (578 | ) | $ | — | $ | 602 | $ | (1,364 | ) | $ | 180 | $ | 4 | |||||||||
Stock option activity and other | — | — | — | — | — | — | |||||||||||||||||
Comprehensive income (loss): | — | ||||||||||||||||||||||
Net loss | (3 | ) | — | — | (3 | ) | — | — | |||||||||||||||
Foreign currency translation adjustment - net | 15 | — | — | — | 15 | — | |||||||||||||||||
Other comprehensive income adjustments - net | — | — | — | — | — | — | |||||||||||||||||
Balance at March 28, 2010 | $ | (566 | ) | $ | — | 602 | $ | (1,367 | ) | $ | 195 | $ | 4 |
(9) | Pension Plans and Other Postretirement Benefits |
The following are the components of the Company’s net pension and postretirement benefit expense for the fiscal three-month periods ended April 3, 2011 and March 28, 2010:
Pension | Postretirement | ||||||||||||||
Fiscal three-month period ended | |||||||||||||||
April 3, 2011 | March 28, 2010 | April 3, 2011 | March 28, 2010 | ||||||||||||
Service cost | $ | 6 | $ | 5 | $ | 1 | $ | 1 | |||||||
Interest cost | 2 | 2 | 1 | 1 | |||||||||||
Amortization of prior service cost (benefit) | — | — | — | — | |||||||||||
Expected return on plan assets | (1 | ) | (1 | ) | — | — | |||||||||
Amortization of actuarial gain | — | — | — | — | |||||||||||
Other | — | — | — | — | |||||||||||
$ | 7 | $ | 6 | $ | 2 | $ | 2 |
In 2011, the Company expects to contribute approximately $14 and $3 to the Company’s Domestic and Foreign plans, respectively. The Company contributed $3 to its Domestic plans during the fiscal three-month period ended April 3, 2011.
11
(10) | Stock Option Plans and Stock-Based Compensation |
On February 23, 2011, the Compensation Committee of the Board of Managers of Holdings LLC approved the Momentive Performance Materials Holdings LLC 2011 Equity Incentive Plan (the “2011 Equity Plan”). Under the 2011 Equity Plan, Holdings LLC can award unit options, unit awards, restricted units, restricted deferred units, and other unit-based awards. The restricted deferred units are nonvoting units of measurement which are deemed to be equivalent to one common unit of Holdings LLC. The unit options are options to purchase common units of Holdings LLC. The awards contain restrictions on transferability and other typical terms and conditions.
The following is a summary of key terms of the stock-based awards granted to MPM employees under the 2011 Equity Plan on February 23, 2011:
Tranche | Holdings LLC Units Granted | Vesting Terms | Option/Unit Term | |||
Unit Options: | 10 years | |||||
Tranche A Options | 728,648 | Time-vest ratably over 4 years; Accelerated vesting six months after a change of control event as defined by the 2011 Equity Plan | ||||
Tranche B Options | 364,319 | Performance-based: Vest upon the earlier of 1) two years from the achievement of the targeted common unit value and a realization event or 2) six months from a change of control event as defined by the 2011 Equity Plan | ||||
Tranche C Options | 364,319 | Performance-based: Vest upon the earlier of 1) one year from the achievement of the targeted common unit value and a realization event or 2) six months from a change in control event as defined by the 2011 Equity Plan | ||||
Restricted Deferred Units ("RDUs"): | N/A | |||||
Tranche A RDUs | 242,877 | Time-vest ratably over 4 years; Accelerated vesting six months from a change in control event as defined by the 2011 Equity Plan | ||||
Tranche B RDUs | 121,440 | Performance-based: Vest upon the earlier of 1) two years from the achievement of the targeted common unit value and a realization event or 2) six months from a change of control event as defined by the 2011 Equity Plan | ||||
Tranche C RDUs | 121,440 | Performance-based: Vest upon the earlier of 1) one year from the achievement of the targeted common unit value and a realization event or 2) six months from a change in control event as defined by the 2011 Equity Plan | ||||
Unit Options
The Tranche A Options were granted with a grant date fair value of approximately $2. The fair value was estimated at the grant date using a Black-Scholes option pricing model. The assumptions used to estimate the fair value were a 2.21% risk free interest rate, a 6.25 year expected life, a 37.4% expected volatility rate and a 0% dividend rate. Compensation cost of less than $1 related to these awards was recognized during the three months ended April 3, 2011.
The Tranche B and Tranche C Options were granted with performance and market conditions with a grant date fair value of approximately $1 and $1, respectively. The fair value was estimated at the grant date using a Monte Carlo valuation method, which is a commonly accepted valuation model for awards with market and performance conditions. The Monte Carlo valuation method requires the use of a range of assumptions. The range of risk-free interest rates were 0.16% to 3.49%, expected volatility rates ranged from 34.5% to 41.5% and a 0% dividend rate. The expected life is not used in the Monte Carlo valuation method, but the output of the model indicated a weighted average expected life of 9.2 years. Compensation cost has not been recognized for the Tranche B and Tranche C Options during the three months ended April 3, 2011 because as of April
12
3, 2011, it is not probable the related options will vest. Compensation cost will be recognized over the service period once the satisfaction of the performance condition is probable.
Restricted Deferred Units
The Tranche A RDUs were granted with a grant date fair value of approximately $1. Compensation cost of less than $1 related to these awards was recognized during the three months ended April 3, 2011.
The Tranche B RDUs and Tranche C RDUs were granted with a grant date fair value of approximately $1 and $1, respectively. The fair value of each RDU was estimated at the grant date using the same Monte Carlo valuation method and assumptions. The RDU's have an indefinite life, thus the term used in the valuation model was 30 years, which resulted in a weighted average expected life of 21.4 years. Compensation cost has not been recognized for the Tranche B RDUs and Tranche C RDUs during the three months ended April 3, 2011 because as of April 3, 2011, it is not probable the related restricted deferred units will vest. Compensation cost will be recognized over the service period once the satisfaction of the performance condition is probable.
Although the 2011 Equity Plan is issued by Holdings LLC, the underlying compensation cost represents compensation costs paid for by Holdings LLC on MPM's behalf, as a result of the employees' service to MPM. All compensation cost is recorded over the requisite service period on a graded-vesting basis and is included in Selling, general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.
(11) Operating Segments
The Company operates in two independent business segments: Silicones and Quartz. The Silicones segment is engaged in the manufacture, sale and distribution of silanes, specialty silicones and urethane additives. The Quartz segment is engaged in the manufacture, sale and distribution of high-purity fused quartz and ceramic materials. The Company’s operating segments are organized based on the nature of the products they produce. The segments are managed separately because each business requires different technology and marketing strategies.
An update of the accounting policies of the Silicones and Quartz segments are as described in the summary of significant accounting policies in Note 2.
Silicones | Quartz | Corporate and other items (c) | Total | ||||||||||||
Fiscal three-month period ended April 3, 2011: | |||||||||||||||
Net sales (a) | $ | 572 | $ | 88 | $ | — | $ | 660 | |||||||
Operating income (loss) (b) | 51 | 22 | — | 73 | |||||||||||
Depreciation and amortization | 43 | 7 | — | 50 | |||||||||||
Interest expense, net | 64 | — | — | 64 | |||||||||||
Provision for income taxes | 10 | 2 | — | 12 | |||||||||||
Capital expenditures | 15 | 3 | — | 18 |
Silicones | Quartz | Corporate and other items (c) | Total | ||||||||||||
Fiscal three-month period ended March 28, 2010: | |||||||||||||||
Net sales (a) | $ | 539 | $ | 66 | $ | — | $ | 605 | |||||||
Operating income (loss) (b) | 58 | 13 | (8 | ) | 63 | ||||||||||
Depreciation and amortization | 40 | 7 | — | 47 | |||||||||||
Interest expense, net | 61 | — | — | 61 | |||||||||||
Provision for income taxes | 2 | 3 | — | 5 | |||||||||||
Capital expenditures | 10 | 1 | — | 11 |
____________________
(a) | There were no intersegment sales during the fiscal three-month periods ended April 3, 2011 or March 28, 2010, respectively. |
(b) | A reconciliation of the segment operating income (loss) to income (loss) before income taxes would include interest |
13
MOMENTIVE PERFORMANCE MATERIALS INC.
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
(Dollar amounts in millions)
income, interest expense and other income (expense), net as presented in the Condensed Consolidated Statements of Operations.
(c) | Corporate and other items include pension and postretirement expenses and headquarter costs, net of corporate assessments. |
The following tables show data by geographic area. Net sales are based on the location of the operation recording the final sale to the customer. Total long-lived assets consist of property and equipment, net of accumulated depreciation and amortization, intangible assets, net of accumulated amortization, and goodwill.
Fiscal three-month period ended | |||||||
April 3, 2011 | March 28, 2010 | ||||||
Net sales: | |||||||
United States | $ | 215 | $ | 195 | |||
Canada | 12 | 11 | |||||
Pacific | 192 | 193 | |||||
Europe | 213 | 185 | |||||
Mexico and Brazil | 28 | 21 | |||||
$ | 660 | $ | 605 |
April 3, 2011 | December 31, 2010 | ||||||
Total long-lived assets: | |||||||
United States | $ | 592 | $ | 599 | |||
Canada | 18 | 18 | |||||
Pacific | 812 | 833 | |||||
Europe | 699 | 663 | |||||
Mexico and Brazil | 8 | 7 | |||||
$ | 2,129 | $ | 2,120 |
(12) Guarantor/Non-Guarantor Subsidiary Financial Information
As of April 3, 2011, the Company had outstanding $200 in aggregate principal amount of second-lien senior notes, $1,161 in aggregate principal amount of springing lien Dollar notes, €150 in aggregate principal amount of springing lien Euro notes and $382 in aggregate principal amount of senior subordinated notes. The notes are fully, jointly, severally and unconditionally guaranteed by the Company’s domestic subsidiaries (the guarantor subsidiaries). The following condensed consolidated financial information presents the Condensed Consolidated Balance Sheets as of April 3, 2011 and December 31, 2010, the Condensed Consolidated Statements of Operations for the fiscal three-month periods ended April 3, 2011 and March 28, 2010 and Condensed Consolidated Statements of Cash Flows for the fiscal three-month periods ended April 3, 2011 and March 28, 2010 of (i) Momentive Performance Materials Inc. (Parent); (ii) the guarantor subsidiaries; (iii) the non-guarantor subsidiaries; and (iv) the Company on a consolidated basis.
These financial statements are prepared on the same basis as the consolidated financial statements of the Company except the investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries relate to investments in subsidiaries and intercompany balances and transactions. The guarantor subsidiaries are 100% owned by Parent and all guarantees are full and unconditional. Additionally, substantially all of the assets of the guarantor subsidiaries and certain non-guarantor subsidiaries are pledged under the senior secured credit facility, and consequently will not be available to satisfy the claims of the Company’s general creditors.
14
Condensed Consolidated Balance Sheet as of April 3, 2011:
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 42 | $ | 3 | $ | 165 | $ | — | $ | 210 | |||||||||
Receivables, net | — | 128 | 297 | — | 425 | ||||||||||||||
Due from affiliates | — | 92 | 28 | (112 | ) | 8 | |||||||||||||
Inventories | — | 212 | 231 | (15 | ) | 428 | |||||||||||||
Prepaid expenses | — | 9 | 3 | — | 12 | ||||||||||||||
Income tax receivable | — | — | 3 | — | 3 | ||||||||||||||
Deferred income taxes | — | — | 9 | 3 | 12 | ||||||||||||||
Other current assets | — | 1 | 2 | — | 3 | ||||||||||||||
Total current assets | 42 | 445 | 738 | (124 | ) | 1,101 | |||||||||||||
Property and equipment, net | — | 502 | 605 | — | 1,107 | ||||||||||||||
Other long-term assets | 59 | 2 | 31 | — | 92 | ||||||||||||||
Deferred income taxes | — | — | 43 | — | 43 | ||||||||||||||
Investment in affiliates | 1,494 | (86 | ) | — | (1,408 | ) | — | ||||||||||||
Intercompany borrowing | — | 1,029 | 161 | (1,190 | ) | — | |||||||||||||
Intangible assets, net | — | 90 | 500 | — | 590 | ||||||||||||||
Goodwill | — | — | 432 | — | 432 | ||||||||||||||
Total assets | $ | 1,595 | $ | 1,982 | $ | 2,510 | $ | (2,722 | ) | $ | 3,365 | ||||||||
Liabilities and Equity (Deficit) | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Trade payables | $ | — | $ | 101 | $ | 210 | $ | — | $ | 311 | |||||||||
Short-term borrowings | — | — | — | — | — | ||||||||||||||
Accrued expenses and other liabilities | 2 | 81 | 93 | — | 176 | ||||||||||||||
Accrued interest | 50 | — | 1 | — | 51 | ||||||||||||||
Due to affiliates | 1 | 29 | 89 | (117 | ) | 2 | |||||||||||||
Accrued income taxes | — | — | 11 | — | 11 | ||||||||||||||
Deferred income taxes | — | — | 24 | — | 24 | ||||||||||||||
Current installments of long-term debt | — | — | 20 | — | 20 | ||||||||||||||
Total current liabilities | 53 | 211 | 448 | (117 | ) | 595 | |||||||||||||
Long-term debt | 1,925 | — | 1,064 | — | 2,989 | ||||||||||||||
Other liabilities | 1 | 8 | 53 | — | 62 | ||||||||||||||
Pension liabilities | — | 155 | 125 | — | 280 | ||||||||||||||
Intercompany Borrowings | 233 | 112 | 841 | (1,186 | ) | — | |||||||||||||
Deferred income taxes | — | 1 | 62 | — | 63 | ||||||||||||||
Total liabilities | 2,212 | 487 | 2,593 | (1,303 | ) | 3,989 | |||||||||||||
Equity (deficit): | |||||||||||||||||||
Additional paid-in capital | 603 | 2,005 | 567 | (2,572 | ) | 603 | |||||||||||||
Accumulated deficit | (1,421 | ) | (712 | ) | (872 | ) | 1,574 | (1,431 | ) | ||||||||||
Accumulated other comprehensive income | 201 | 202 | 219 | (421 | ) | 201 | |||||||||||||
Total Momentive Performance Materials Inc.’s equity (deficit) | (617 | ) | 1,495 | (86 | ) | (1,419 | ) | (627 | ) | ||||||||||
Noncontrolling interests | — | — | 3 | — | 3 | ||||||||||||||
Total equity (deficit) | (617 | ) | 1,495 | (83 | ) | (1,419 | ) | (624 | ) | ||||||||||
Total liabilities and equity (deficit) | $ | 1,595 | $ | 1,982 | $ | 2,510 | $ | (2,722 | ) | $ | 3,365 |
15
Condensed Consolidated Balance Sheet as of December 31, 2010:
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets | |||||||||||||||||||
Current assets: | |||||||||||||||||||
Cash and cash equivalents | $ | 31 | $ | 1 | $ | 222 | $ | — | $ | 254 | |||||||||
Receivables, net | — | 108 | 277 | — | 385 | ||||||||||||||
Due from affiliates | 2 | 84 | 30 | (112 | ) | 4 | |||||||||||||
Inventories | — | 196 | 194 | (15 | ) | 375 | |||||||||||||
Prepaid expenses | — | 7 | 3 | — | 10 | ||||||||||||||
Income tax receivable | — | — | 2 | — | 2 | ||||||||||||||
Deferred income taxes | — | — | 9 | 3 | 12 | ||||||||||||||
Other current assets | — | 1 | — | — | 1 | ||||||||||||||
Total current assets | 33 | 397 | 737 | (124 | ) | 1,043 | |||||||||||||
Property and equipment, net | — | 507 | 602 | — | 1,109 | ||||||||||||||
Other long-term assets | 60 | 2 | 26 | — | 88 | ||||||||||||||
Deferred income taxes | — | 41 | — | 41 | |||||||||||||||
Investment in affiliates | 1,440 | (86 | ) | — | (1,354 | ) | — | ||||||||||||
Intercompany borrowing | — | 997 | 109 | (1,106 | ) | — | |||||||||||||
Intangible assets, net | — | 91 | 495 | — | 586 | ||||||||||||||
Goodwill | — | — | 425 | — | 425 | ||||||||||||||
Total assets | $ | 1,533 | $ | 1,908 | $ | 2,435 | $ | (2,584 | ) | $ | 3,292 | ||||||||
Liabilities and Equity (Deficit) | |||||||||||||||||||
Current liabilities: | |||||||||||||||||||
Trade payables | $ | — | $ | 86 | $ | 217 | $ | — | $ | 303 | |||||||||
Short-term borrowings | — | — | 2 | — | 2 | ||||||||||||||
Accrued expenses and other liabilities | 1 | 79 | 90 | — | 170 | ||||||||||||||
Accrued interest | 25 | — | — | — | 25 | ||||||||||||||
Due to affiliates | 30 | 84 | (112 | ) | 2 | ||||||||||||||
Accrued income taxes | — | 1 | 9 | — | 10 | ||||||||||||||
Deferred income taxes | — | — | 13 | — | 13 | ||||||||||||||
Current installments of long-term debt | — | — | 25 | — | 25 | ||||||||||||||
Total current liabilities | 26 | 196 | 440 | (112 | ) | 550 | |||||||||||||
Long-term debt | 1,910 | — | 1,042 | — | 2,952 | ||||||||||||||
Other liabilities | — | 9 | 50 | — | 59 | ||||||||||||||
Pension liabilities | — | 151 | 121 | — | 272 | ||||||||||||||
Intercompany Borrowings | 195 | 109 | 802 | (1,106 | ) | — | |||||||||||||
Deferred income taxes | — | 1 | 62 | — | 63 | ||||||||||||||
Total liabilities | 2,131 | 466 | 2,517 | (1,218 | ) | 3,896 | |||||||||||||
Equity (deficit): | |||||||||||||||||||
Additional paid-in capital | 603 | 2,004 | 569 | (2,573 | ) | 603 | |||||||||||||
Accumulated deficit | (1,418 | ) | (779 | ) | (889 | ) | 1,658 | (1,428 | ) | ||||||||||
Accumulated other comprehensive income | 217 | 217 | 234 | (451 | ) | 217 | |||||||||||||
Total Momentive Performance Materials Inc.’s equity (deficit) | (598 | ) | 1,442 | (86 | ) | (1,366 | ) | (608 | ) | ||||||||||
Noncontrolling interests | — | — | 4 | — | 4 | ||||||||||||||
Total equity (deficit) | (598 | ) | 1,442 | (82 | ) | (1,366 | ) | (604 | ) | ||||||||||
Total liabilities and equity (deficit) | $ | 1,533 | $ | 1,908 | $ | 2,435 | $ | (2,584 | ) | $ | 3,292 |
16
Condensed Consolidated Statements of Operations for the fiscal three-month periods ended April 3, 2011 and March 28, 2010:
Fiscal three-month period ended April 3, 2011 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 305 | $ | 510 | $ | (155 | ) | $ | 660 | ||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales, excluding depreciation | — | 202 | 370 | (155 | ) | 417 | |||||||||||||
Selling, general and administrative expenses | 16 | 45 | 39 | — | 100 | ||||||||||||||
Depreciation and amortization expenses | — | 19 | 31 | — | 50 | ||||||||||||||
Research and development expenses | — | 14 | 6 | — | 20 | ||||||||||||||
Operating income (loss) | (16 | ) | 25 | 64 | — | 73 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest income | — | 26 | 2 | (28 | ) | — | |||||||||||||
Interest expense | (54 | ) | (3 | ) | (35 | ) | 28 | (64 | ) | ||||||||||
Other income (expense), net | 67 | 19 | (2 | ) | (84 | ) | — | ||||||||||||
Income (loss) before income taxes | (3 | ) | 67 | 29 | (84 | ) | 9 | ||||||||||||
Income taxes (benefit) | — | — | 12 | — | 12 | ||||||||||||||
Net income (loss) | (3 | ) | 67 | 17 | (84 | ) | (3 | ) | |||||||||||
Net loss attibutable to noncontrolling interests | — | — | — | — | — | ||||||||||||||
Net income (loss) attibutable to Momentive Performance Materials Inc. | $ | (3 | ) | $ | 67 | $ | 17 | $ | (84 | ) | $ | (3 | ) | ||||||
Fiscal three-month period ended March 28, 2010 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net sales | $ | — | $ | 256 | $ | 463 | $ | (114 | ) | $ | 605 | ||||||||
Costs and expenses: | |||||||||||||||||||
Cost of sales, excluding depreciation | — | 167 | 322 | (112 | ) | 377 | |||||||||||||
Selling, general and administrative expenses | (28 | ) | 40 | 90 | — | 102 | |||||||||||||
Depreciation and amortization expenses | — | 20 | 27 | — | 47 | ||||||||||||||
Research and development expenses | — | 11 | 5 | — | 16 | ||||||||||||||
Operating income (loss) | 28 | 18 | 19 | (2 | ) | 63 | |||||||||||||
Other income (expense): | |||||||||||||||||||
Interest income | — | 23 | 2 | (25 | ) | — | |||||||||||||
Interest expense | (52 | ) | — | (34 | ) | 25 | (61 | ) | |||||||||||
Other income (expense), net | 21 | (21 | ) | — | — | — | |||||||||||||
Income (loss) before income taxes | (3 | ) | 20 | (13 | ) | (2 | ) | 2 | |||||||||||
Income taxes (benefit) | — | — | 6 | (1 | ) | 5 | |||||||||||||
Net income (loss) | (3 | ) | 20 | (19 | ) | (1 | ) | (3 | ) | ||||||||||
Net income attibutable to noncontrolling interests | — | — | — | — | — | ||||||||||||||
Net income (loss) attibutable to Momentive Performance Materials Inc. | $ | (3 | ) | $ | 20 | $ | (19 | ) | $ | (1 | ) | $ | (3 | ) |
17
Condensed Consolidated Statement of Cash Flows for the fiscal three-month period ended April 3, 2011:
Fiscal three-month period ended April 3, 2011 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net cash provided by (used in) operating activities | $ | (37 | ) | $ | 41 | $ | 7 | $ | — | $ | 11 | ||||||||
Cash flows from investing activities: | |||||||||||||||||||
Capital expenditures | — | (10 | ) | (8 | ) | — | (18 | ) | |||||||||||
Purchases of intangible assets | — | (1 | ) | — | — | (1 | ) | ||||||||||||
Net cash used in investing activities | — | (11 | ) | (8 | ) | — | (19 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Debt issuance cost | (5 | ) | — | — | — | (5 | ) | ||||||||||||
Dividends paid within MPM Inc., net | — | 2 | (2 | ) | — | — | |||||||||||||
Net decrease in short-term borrowings | — | — | (2 | ) | — | (2 | ) | ||||||||||||
Proceeds from long-term debt | — | — | 37 | — | 37 | ||||||||||||||
Payments of long-term debt | — | — | (55 | ) | — | (55 | ) | ||||||||||||
Intercompany borrowing | 37 | (21 | ) | (16 | ) | — | — | ||||||||||||
Net financing activities between affiliates | 3 | (9 | ) | 6 | — | — | |||||||||||||
Net cash provided by (used in) financing activities | 35 | (28 | ) | (32 | ) | — | (25 | ) | |||||||||||
Increase (decrease) in cash and cash equivalents | (2 | ) | 2 | (33 | ) | — | (33 | ) | |||||||||||
Effect of exchange rate changes on cash | 13 | — | (24 | ) | — | (11 | ) | ||||||||||||
Cash and cash equivalents, beginning of period | 31 | 1 | 222 | — | 254 | ||||||||||||||
Cash and cash equivalents, end of period | $ | 42 | $ | 3 | $ | 165 | $ | — | $ | 210 |
Fiscal three-month period ended March 28, 2010 | |||||||||||||||||||
Parent | Guarantor Subsidiaries | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Net cash provided by (used in) operating activities | $ | 25 | $ | 43 | $ | (10 | ) | $ | — | $ | 58 | ||||||||
Cash flows from investing activities: | |||||||||||||||||||
Capital expenditures | — | (7 | ) | (4 | ) | — | (11 | ) | |||||||||||
Purchases of intangible assets | — | (1 | ) | — | — | (1 | ) | ||||||||||||
Net cash used in investing activities | — | (8 | ) | (4 | ) | — | (12 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Dividends paid within MPM Inc., net | — | 3 | (3 | ) | — | — | |||||||||||||
Payments of long-term debt | — | (75 | ) | — | — | (75 | ) | ||||||||||||
Net borrowings with affiliates | (25 | ) | 31 | (6 | ) | — | — | ||||||||||||
Net cash used in financing activities | (25 | ) | (41 | ) | (9 | ) | — | (75 | ) | ||||||||||
Decrease in cash and cash equivalents | — | (6 | ) | (23 | ) |