Exhibit 99.2
HEXION INC.
Pro Forma Net Sales and Pro Forma Segment EBITDA Tables
On March 21, 2016, Hexion Inc. (the "Company") announced the proposed sale of its Performance Adhesives, Powder Coatings, Additives & Acrylic Coatings and Monomers (“PAC”) business to Synthomer plc, which was completed on June 30, 2016. On May 31, 2016, the Company announced the completed sale of its 50% interest in HA-International, LLC (“HAI”), a joint venture serving the North American foundry industry, to its joint venture partner HA-USA, Inc. Both of these dispositions impact the Company's Epoxy, Phenolic and Coating Resins segment. To illustrate the impact of these dispositions on the Company's historical segment results, the Company has presented Pro Forma Net Sales and Pro Forma Segment EBITDA below, which excludes the historical results of the PAC business and HAI joint venture, for the annual periods ended December 31, 2015 and 2014, as well as the quarterly periods ended June 30, 2016 and 2015, March 31, 2016 and 2015; December 31, 2015 and September 30, 2015. These pro forma adjustments do not include cost savings related to certain in-process overhead reductions that the Company is executing in connection with these dispositions.
Non-U.S. GAAP Measures
Pro Forma Net Sales is calculated as Net Sales adjusted to exclude the historical results of the Company's PAC business, which was sold during the second quarter of 2016. Pro Forma Net Sales is used by the Company's senior management and board of directors as a basis for comparing sales revenues between post-disposition and pre-disposition periods. Pro Forma Net Sales may not be comparable to similarly titled measures reported by other companies.
Segment EBITDA is defined as EBITDA adjusted to exclude certain non-cash and non-recurring 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 income (loss) or other results reported in accordance with U.S. GAAP. Segment EBITDA may not be comparable to similarly titled measures reported by other companies.
Pro Forma Segment EBITDA is calculated as Segment EBITDA adjusted to exclude the historical results of the Company's PAC business and 50% interest in the HAI joint venture, both of which were sold during the second quarter of 2016. Pro Forma Segment EBITDA is used by the Company's senior management and board of directors as a basis for comparing operating results between post-disposition and pre-disposition periods. Pro Forma Segment EBITDA should not be considered a substitute for net income (loss) or other results reported in accordance with U.S. GAAP. Pro Forma Segment EBITDA may not be comparable to similarly titled measures reported by other companies.
Pro Forma Net Sales and Pro Forma Segment EBITDA Summary
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended: |
| | June 30, 2016 | | March 31, 2016 | | December 31, 2015 | | September 31, 2015 | | June 30, 2015 | | March 31, 2015 |
| Net Sales | $ | 952 |
| | $ | 909 |
| | $ | 909 |
| | $ | 1,065 |
| | $ | 1,087 |
| | $ | 1,079 |
|
| Adjustment for dispositions | (98 | ) | | (87 | ) | | (78 | ) | | (99 | ) | | (100 | ) | | (92 | ) |
| Pro Forma Net Sales | $ | 854 |
| | $ | 822 |
| | $ | 831 |
| | $ | 966 |
| | $ | 987 |
| | $ | 987 |
|
| | | | | | | | | | | | |
| Segment EBITDA | $ | 130 |
| | $ | 122 |
| | $ | 73 |
| | $ | 133 |
| | $ | 133 |
| | $ | 127 |
|
Adjustment for dispositions (1) | (15 | ) | | (15 | ) | | (8 | ) | | (15 | ) | | (14 | ) | | (13 | ) |
| Pro Forma Segment EBITDA | $ | 115 |
| | $ | 107 |
| | $ | 65 |
| | $ | 118 |
| | $ | 119 |
| | $ | 114 |
|
|
| | | | | | | |
| | Year Ended December 31, |
| | 2015 | | 2014 |
| Net Sales | $ | 4,140 |
| | $ | 5,137 |
|
| Adjustment for dispositions | (369 | ) | | (481 | ) |
| Pro Forma Net Sales | $ | 3,771 |
| | $ | 4,656 |
|
| | | | |
| Segment EBITDA | $ | 466 |
| | $ | 462 |
|
Adjustment for dispositions (1) | (50 | ) | | (45 | ) |
| Pro Forma Segment EBITDA | $ | 416 |
| | $ | 417 |
|
(1) Adjustment for 2016 and 2015 includes $1 and $3, respectively, of insurance recoveries received in these years related to lost volumes as a result of a supplier disruption.
Reconciliation of Net Income (Loss) to Pro Forma Segment EBITDA
|
| | | | | | | |
| | Three Months Ended: |
| | June 30, 2016 | | March 31, 2016 |
| Net income (loss) | $ | 150 |
| | $ | (44 | ) |
| Income tax expense | 17 |
| | 7 |
|
| Interest expense, net | 80 |
| | 79 |
|
| Depreciation and amortization | 36 |
| | 35 |
|
| Accelerated depreciation | 60 |
| | 46 |
|
| EBITDA | 343 |
| | 123 |
|
| Adjustments to EBITDA: | | | |
| Business realignment costs | 42 |
| | 3 |
|
| Realized and unrealized foreign currency (gains) losses | (11 | ) | | 2 |
|
| Gain on dispositions | (240 | ) | | — |
|
| Gain on extinguishment of debt | (21 | ) | | (23 | ) |
| Other | 17 |
| | 17 |
|
| Total adjustments | (213 | ) | | (1 | ) |
| | | | |
| Segment EBITDA | 130 |
| | 122 |
|
| Adjustment for dispositions | (15 | ) | | (15 | ) |
| Pro Forma Segment EBITDA | $ | 115 |
| | $ | 107 |
|
|
| | | | | | | | | | | | | | | |
| | Three Months Ended: |
| | December 31, 2015 | | September 30, 2015 | | June 30, 2015 | | March 31, 2015 |
| Net (loss) income | $ | (10 | ) | | $ | 7 |
| | $ | (2 | ) | | $ | (34 | ) |
| Net income attributable to noncontrolling interest | (1 | ) | | — |
| | — |
| | — |
|
| Income tax expense | 6 |
| | 1 |
| | 1 |
| | 26 |
|
| Interest expense, net | 81 |
| | 84 |
| | 84 |
| | 77 |
|
| Depreciation and amortization | 35 |
| | 34 |
| | 34 |
| | 34 |
|
| EBITDA | 111 |
| | 126 |
| | 117 |
| | 103 |
|
| Adjustments to EBITDA: | | | | | | | |
| Business realignment costs | 5 |
| | 3 |
| | 5 |
| | 3 |
|
| Realized and unrealized foreign currency (gains) losses | (7 | ) | | 14 |
| | — |
| | 3 |
|
| Asset impairments | 6 |
| | — |
| | — |
| | — |
|
| Gain on extinguishment of debt | (27 | ) | | (14 | ) | | — |
| | — |
|
| Unrealized gains on pension and postretirement benefits | (13 | ) | | — |
| | — |
| | — |
|
| Other | (2 | ) | | 4 |
| | 11 |
| | 18 |
|
| Total adjustments | (38 | ) | | 7 |
| | 16 |
| | 24 |
|
| | | | | | | | |
| Segment EBITDA | 73 |
| | 133 |
| | 133 |
| | 127 |
|
| Adjustment for dispositions | (8 | ) | | (15 | ) | | (14 | ) | | (13 | ) |
| Pro Forma Segment EBITDA | $ | 65 |
| | $ | 118 |
| | $ | 119 |
| | $ | 114 |
|
|
| | | | | | | |
| | Year Ended December 31, |
| | 2015 | | 2014 |
| Net loss | $ | (39 | ) | | $ | (224 | ) |
| Net (income) loss attributable to noncontrolling interest | (1 | ) | | 1 |
|
| Income tax expense | 34 |
| | 22 |
|
| Interest expense, net | 326 |
| | 308 |
|
| Depreciation and amortization | 137 |
| | 144 |
|
| EBITDA | 457 |
| | 251 |
|
| Adjustments to EBITDA: | | | |
| Asset impairments | 6 |
| | 5 |
|
| Business realignment costs | 16 |
| | 47 |
|
| Realized and unrealized foreign currency losses | 10 |
| | 32 |
|
| Unrealized (gains) losses on pension and postretirement benefits | (13 | ) | | 102 |
|
| Gain on extinguishment of debt | (41 | ) | | — |
|
| Other | 31 |
| | 25 |
|
| Total adjustments | 9 |
| | 211 |
|
| | | | |
| Segment EBITDA | 466 |
| | 462 |
|
| Adjustment for dispositions | (50 | ) | | (45 | ) |
| Pro Forma Segment EBITDA | $ | 416 |
| | $ | 417 |
|
Items Not Included in Segment EBITDA and Pro Forma Segment EBITDA
Not included in Segment EBITDA and Pro Forma Segment EBITDA are certain non-cash items and other income and expenses. Segment EBITDA related to the divested businesses has been deducted from Segment EBITDA to calculate Pro Forma Segment EBITDA.
For the three months ended June 30, 2016 and March 31, 2016, these other items primarily include expenses from retention programs and certain professional fees related to strategic projects. Business realignment costs for the three months ended June 30, 2016 primarily include costs related to the planned facility rationalization within the Epoxy, Phenolic and Coating Resins segment and costs related to certain in-process cost reduction programs. Business realignment costs for the three months ended March 31, 2016 include costs for environmental remediation at certain formerly owned locations and expenses related to certain in-process cost reduction programs.
For 2015, these other items primarily include expenses from retention programs, certain professional fees and management fees, partially offset by gains on the disposal of assets and a gain on a step acquisition. Business realignment costs for 2015 primarily include costs related to certain in-process cost reduction programs.
For 2014, these other items primarily include expenses from retention programs, partially offset by gains on the disposal of assets. Business realignment costs for 2014 primarily include expenses from the Company’s newly implemented restructuring and cost optimization programs, as well as costs for environmental remediation at certain formerly owned locations.
