Item 2.02 Results of Operations and Financial Condition
On September 27, 2020, Hexion Inc. (the "Company" or "Hexion") entered into a
Purchase Agreement for the sale of phenolic specialty resins ("PSR"), Hexamine
and European-based Forest Products Resins businesses (together with PSR, the
"Held for Sale Business" or the "Business") to Black Diamond Capital Management,
LLC and Investindustrial (the "Buyers") for a purchase price of approximately
$425 million. The consideration consists of $335 million in cash and certain
assumed liabilities with the remainder in future contingent proceeds based on
the performance of the Held for Sale Business. The final purchase price is
subject to customary post-closing adjustments. The Held for Sale Business was
formerly included in the Company's Adhesives reportable segment.
Assets included in the transaction are the Company's manufacturing sites in
Barry, United Kingdom; Cowie, United Kingdom; Lantaron, Spain; Botlek,
Netherlands; Iserlohn, Germany; Frielendorf, Germany; Solbiate, Italy; Kitee,
Finland; Louisville, Kentucky; Acme, North Carolina; and the Company's 50%
ownership interest in Hexion Schekinoazot Holding B.V. (the "Russia JV"), a
joint venture that manufactures forest products resins in Russia.
In the Company's Quarterly Report on Form 10-Q as of September 30, 2020 (the "Q3
2020 10-Q"), the Company reclassified the assets and liabilities of the Held for
Sale Business as held for sale on the unaudited Condensed Consolidated Balance
Sheets and reported the results of the operations for the three and nine months
ended September 30, 2020 as "(Loss) income from discontinued operations, net of
taxes" on the unaudited Condensed Consolidated Statements of Operations. Amounts
for prior periods were retrospectively reclassified for all periods presented.
This Current Report on Form 8-K includes the Company's unaudited revised net
sales, Segment EBITDA (see definition below), depreciation and amortization and
capital expenditures by reportable segment for continuing operations (excluding
the Held for Sale Business) for the periods July 2, 2019 through December 31,
2019, January 1, 2019 through July 1, 2019 and for the year ended December 31,
2018, as well as unaudited revised net sales and Segment EBITDA for all quarters
in the first half of 2020 and the fiscal years 2019 and 2018.
The information contained in this Current Report shall not be deemed to be
"filed" for the purposes of Section 18 of the Securities Exchange Act of 1934
(the "Exchange Act") or otherwise subject to the liabilities of that section,
nor shall it be incorporated by reference into a filing under the Securities Act
of 1933, or the Exchange Act.
Segment EBITDA
Segment EBITDA is defined as EBITDA (earnings before interest, income taxes,
depreciation and amortization) 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 is also the
profitability measure used to set management and executive incentive
compensation goals. Corporate and Other primarily represents certain corporate,
general and administrative expenses that are not allocated to the other
segments. Segment EBITDA should not be considered a substitute for net (loss)
income or other results reported in accordance with U.S. GAAP. Segment EBITDA
may not be comparable to similarly titled measures reported by other companies.
Forward Looking Statements
This Current Report contains forward-looking statements within the meaning of
and made pursuant to the safe harbor provisions of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Exchange Act, as amended. In
addition, our management may from time to time make oral forward-looking
statements. All statements, other than statements of historical facts, are
forward-looking statements. Forward-looking statements may be identified by the
words "believe," "expect," "anticipate," "project," "might," "plan," "estimate,"
"may," "will," "could," "should," "seek" or "intend" and similar expressions.
Forward-looking statements reflect our current expectations and assumptions
regarding our business, the economy and other future events and conditions and
are based on currently available financial, economic and competitive data and
our current business plans. Actual results could vary materially depending on
risks and uncertainties that may affect our operations, markets, services,
prices and other factors as discussed in the Risk Factors section of our filings
with the Securities and Exchange Commission (the "SEC"). While we believe our
assumptions are reasonable, we caution you against relying on any
forward-looking statements as it is very difficult to predict the impact of
known factors, and it is impossible for us to anticipate all factors that could
affect our actual results. Important factors that could cause actual results to
differ materially from those in the forward-looking statements include, but are
not limited to, a weakening of global economic and financial conditions,
interruptions in the supply of or increased cost of raw materials, the loss of,
or difficulties with the further realization of, cost savings in connection with
our strategic initiatives, the impact of our indebtedness, our failure to comply
with financial covenants under our credit facilities or other debt, pricing
actions by our competitors that could affect our operating margins, changes in
governmental regulations and related compliance and litigation costs and the
other factors listed in the Risk Factors section of our SEC filings. For a more
detailed discussion of these and other risk factors, see the Risk Factors
section of our most recent filings made with the SEC. All forward-looking
statements are expressly qualified in their entirety by this cautionary notice.
The forward-looking statements made by us speak only as of the date on which
they are made. Factors or events that could cause our actual results to differ
may emerge from time to time. We undertake no obligation to publicly update or
revise any forward-looking statement as a result of new information, future
events or otherwise, except as otherwise required by law.
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Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit No. Description
99.1 Hexion Continuing Operations Financial Results
104 Cover Page Interactive Data File, formatted in Inline XBRL and included as
Exhibit 101.
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