Hexion Specialty Chemicals Announces Preliminary First Quarter 2009 Results (4/21/09)
As expected, first quarter 2009 volumes and operating margins continued trends experienced late in 2008. Hexion now expects to post sales of approximately $900 million, operating income of $5 million to $15 million and Segment EBITDA (earnings before interest, taxes, depreciation and amortization) of $55 million to $62 million in the first quarter of 2009.
The company recorded revenues of $1.64 billion, operating income of $83 million and Segment EBITDA of $154 million in the first quarter of 2008.
Hexion expects to be in compliance with all of the terms of its outstanding indebtedness, including the financial covenants, at the end of the first quarter of 2009. The company estimates that its net debt was approximately $3.45 billion at the quarter ended March 31, 2009, down from $3.73 billion on Dec. 31, 2008. The company also estimates that it had liquidity of approximately $420 million as of March 31, 2009, which is comprised of cash plus available borrowings under its credit facilities and includes the commitment from certain affiliates of Apollo Management.
Hexion previously announced that it was implementing multiple initiatives to reduce costs and improve efficiencies throughout its global operations. In the first quarter of 2009, the company also finalized plans for approximately $50 million in additional productivity initiatives. Hexion estimates that these cost reduction activities will occur over the next nine to 15 months.
As previously announced, the board of directors has authorized Hexion from time to time to retire or purchase a portion of the company’s outstanding debt securities through cash purchases, in open market purchases, privately negotiated transactions or otherwise. In the first quarter of 2009, Hexion purchased approximately $196 million in face value of its outstanding debt securities for approximately $26 million. In the first quarter of 2009, Hexion will record a gain of approximately $170 million as a result of paying down portions of its outstanding debt for amounts less than face value. Of the $196 million in face value of repurchased debt securities, the company purchased: approximately $92 million in face value of its 9.75% second-priority senior secured notes due 2014; approximately $80 million in face value of its floating rate second-priority senior secured notes due 2014; and approximately $24 million in face value of various unsecured debentures due 2016 and beyond. Hexion expects annual cash interest savings of $16 million.
In addition, after the quarter ended, Hexion purchased $180 million of Hexion LLC outstanding debt securities for approximately $23 million.
Hexion expects filing a more detailed press release regarding its first quarter 2009 results on Form 8-K as well as filing its Form 10-Q for the three months ended March 31, 2009, in early May 2009 with an accompanying investor conference call to follow shortly thereafter.
For more information, visit www.hexion.com.