EX-99.2 3 exhibit992.htm PRO FORMA TABLES Exhibit


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.