Tuesday, March 9, 2010

Alpine Air at Number 142 on USPS Annual List of Top 150 Providers

Alpine Air Express: Home

Defense News ~ PROVO, UT--(Marketwire - 03/09/10) - Alpine Air Express Inc. (OTC.BB:APNX - News) announces that its wholly owned subsidiary, Alpine Aviation Inc., is listed at number 142 on the US Postal Service's annual report of its top 150 suppliers. The data is based on payments made during the Fiscal-Year 2009 (October 1, 2008 - September 30, 2009). An integrated service provider, Alpine Air has been moving airmail and other cargo for 17 consecutive years in Montana, and for 8 years in the Dakotas.

Mr. Gene Mallette, Alpine Air's CEO, stated, "We're pleased to continue to chart amongst the top of USPS suppliers. Alpine's well underway in the first year of a six-year contract with the US Postal Service, covering all of our areas of operation, and we look forward to providing excellent service for many years to come. Alpine has consistently delivered at a 98% on-time performance rating, which is a testament to the integrity of our organization."

Chairman of the Board of Directors, Joe Etchart of Glasgow, MT, added, "It's great to be where we're at, on a very solid and profitable base, but we've also got the equipment and logistics for additional runs. We'll keep pushing for new contracts and, especially as the economy continues to get its legs back, we can only go up the list."

This press release may contain forward-looking statements including the Company's beliefs about its business prospects and future results of operations. These statements involve risks and uncertainties. Among the important additional factors that could cause actual results to differ materially from those forward-looking statements are risks associated with the overall economic environment, changes in anticipated earnings of the company and other factors detailed in the company's filings with the SEC. In addition, the factors underlying company forecasts are dynamic and subject to change and therefore those forecasts speak only as of the date they are given. The company does not undertake to update them; however, it may choose from time to time to update them and if it should do so, it will disseminate the updates to the investing public.

Jacobs Receives Contract from Air Force Research Laboratory

Defense News ~ PASADENA, Calif., March 9 /PRNewswire-FirstCall/ -- Jacobs Engineering Group Inc. (NYSE:JEC - News) announced today that it received a contract from the Air Force Research Laboratory's Airbase Technologies Division to perform research and development of technologies for deployed airbase infrastructure, force protection and homeland defense operations.

Officials estimate the potential value of the 3-year contract at $9.9 million.

Jacobs will provide technical expertise to execute a comprehensive research and development program that includes the design, development and testing of new protective structural systems and components. The new technologies aim to improve the physical protection of personnel from conventional and improvised explosive devices.

In making the announcement, Jacobs President and CEO Craig Martin stated, "This contract provides an excellent opportunity to build upon our longstanding relationship with the AFRL. Our services will help Air Force investment and acquisition decision makers choose the right technologies to meet current and future operational requirements for force protection and airbase infrastructure operations."

Jacobs is one of the world's largest and most diverse providers of technical, professional, and construction services.

Any statements made in this release that are not based on historical fact are forward-looking statements. Although such statements are based on management's current estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain. We, therefore, caution the reader that there are a variety of factors that could cause business conditions and results to differ materially from what is contained in our forward-looking statements. For a description of some of the factors which may occur that could cause actual results to differ from our forward-looking statements please refer to our 2009 Form 10-K, and in particular the discussions contained under Items 1 - Business, 1A - Risk Factors, 3 - Legal Proceedings, and 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations. We also caution the readers of this release that we do not undertake to update any forward-looking statements made herein.

For additional information contact:

Michelle Jones


(Logo: http://www.newscom.com/cgi-bin/prnh/20090109/JACOBSEGLOGO)

Related Headlines

U.S. TANKER EADS chief executive Louis Gallois told reporters Northrop's withdrawal from the tanker tender meant: "We have no chance to win in the co

* Set to leave U.S. tanker contest after Northrop exit

* A380 production niggles to weigh substantially on 2010

* 2010 EBIT seen around 1 billion euros

* To increase A320 production in December

* Shares down 5.2 percent

(Adds quotes, detail, background, shares)

By Tim Hepher and Matthias Blamont

Defense News ~ PARIS, March 9 (Reuters) - Airbus parent EADS (EAD.PA) ruled out a solo bid for a lucrative U.S. tanker contract and said production niggles on its A380 superjumbo would hit core profit substantially this year, knocking its shares on Tuesday.

The Franco-German group also axed its dividend when posting a big loss for 2009 including a previously announced charge of 1.8 billion euros ($2.4 billion) for its share of last week's bailout for the A400M military transport. [ID:nLDE6241P1]

But EADS was confident enough in a nascent aviation recovery to plan an increase in single-aisle Airbus A320 production to 36 a month from December from 34, and said it expected stable revenue and a 2010 operating profit of around 1 billion euros.

On Monday, EADS's U.S. partner Northrop Grumman (NOC.N) dropped out of the race to build a U.S. military tanker, leaving U.S. rival Boeing (BA.N) as the sole bidder. [ID:nN08190077]

The tanker setback and the spectre of difficulty containing costs on the A380, as airlines order customised features for the world's largest passenger plane, left EADS shares 5.2 percent lower at 1025 GMT to be Europe's top blue-chip loser.


EADS chief executive Louis Gallois told reporters Northrop's withdrawal from the tanker tender meant: "We have no chance to win in the competition in these conditions".

Airbus chief executive Tom Enders also dampened talk of an independent European bid, barring a change in the situation.

"I leave the political assessment to others. For me it is clear, however, that under the current conditions a bid makes no economic sense for Airbus," he told Reuters by email.

Politicians were quick to act.

European Union trade commissioner Karel De Gucht said it was "highly regrettable that a major potential supplier would feel unable to bid for a contract of this type".

The German government's coordinator for aerospace matters, Peter Hintze, told Reuters the United States should rethink its competition to supply aerial refuelling aircraft, while German economy minister Rainer Bruederle said the U.S. government had given a clear advantage to Boeing. [ID:nBAT005215]

Evolution Securities analyst Nick Cunningham said the U.S. tanker news was a "shock ... That may not be done yet though".


EADS, the world's second-largest aerospace group after Boeing, posted a 2009 net loss of 763 million euros and an operating loss of 322 million, a far cry from net profit of 1.57 billion and an operating surplus of 2.8 billion in 2008.

"The A380 continued to weigh heavily on the underlying performance," EADS said, adding it had also suffered exceptional foreign exchange effects.

Total currency effects hit 2009 earnings before interest and tax by 2.5 billion euros compared to 2008, it said.

EADS excludes some exceptional items and goodwill from its standard reporting of operating income, but has recently used another yardstick stripping out other one-off items such as the A400M to allow investors to gauge its underlying business.

Such operating earnings before one-offs generated a 2.2 billion euro profit in 2009, beating a company forecast for 2 billion. Weakness in commercial aerospace was offset by strength in defence including higher Eurofighter export deliveries.

In a surprise move, EADS announced the planned increase in output of its most popular family of single-aisle planes, the A320. However, it said it had used up some of the "buffers" in development of its future mid-sized A350.

"I feel we can now turn our attention to growth again," Gallois told analysts. Boeing, whose 2009 profit beat forecasts, said last month it was seeing improved demand for jetliners. [ID:nN26103777]

But DZ Bank analyst Markus Turnwald said: "The (EADS) outlook for 2010 is very disappointing due to deteriorating (currency) hedge rates and further A380 problems". [ID:nN11250405] (Editing by James Regan, Writing by Dan Lalor)

UPDATE 1-LMI Aerospace Q4 profit tops Street; cuts 2010 rev view

LMI Aerospace, Inc. Logo

* Q4 adj EPS $0.26 vs est $0.25/shr

* Rev rises about 7 pct

* Says some markets may experience reduced demand

Defense News ~March 9 (Reuters) - LMI Aerospace Inc (LMIA.O), which makes parts for the aerospace and defense industries, reported better-than-expected quarterly profit on strong sales at its aerostructures segment, but lowered its 2010 revenue outlook.

The company also said some of its markets may experience reduced demand in 2011 and 2012.

For the fourth quarter, net income was $804,000, or 7 cents a share, compared with $585,000, or 5 cents a share, a year ago.

Excluding charges, the company earned 26 cents a share.

Net sales for the company, whose customers include Gulfstream and Spirit AeroSystems (SPR.N), rose about 7 percent to $55.6 million.

Net sales for the aerostructures segment rose 16 percent to $37.8 million.

Analysts on average were expecting earnings of 25 cents a share, on revenue of $58.3 million, according to Thomson Reuters I/B/E/S.

For 2010, the company expects revenue of $245 million to $260 million, down from its prior view of $255 million to $270 million.

The reduction in revenue expectations is a result of the deferral of about 30 Boeing Co (BA.N) 767 wing modification kits to later years and the cancellation of a portion of a kitting program on the Boeing 747-8, the company said in a statement.

Shares of the company closed at $13.88 Monday on Nasdaq. (Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Bijoy Koyitty)

Hexion Specialty Chemicals Reports Fourth Quarter and Fiscal Year 2009 Results

Defense News ~ COLUMBUS, Ohio--(BUSINESS WIRE)--Hexion Specialty Chemicals, Inc., today reported its results for the fourth quarter and year ended December 31, 2009. Results for the fourth quarter of 2009 include:
  • Revenues of $1.09 billion in the fourth quarter of 2009 compared to $1.18 billion during the prior year period as the sales decline reflected the contractual pass through of lower raw material prices, which more than offset year-over-year volume gains and pricing actions.
  • Operating income of $36 million for the fourth quarter of 2009 compared to an operating loss of $876 million for the prior year period. Fourth quarter 2009 operating income improved compared to the prior year due to lower asset impairment and business realignment costs. Fourth quarter 2008 results included $800 million in terminated merger expenses.
  • Net loss attributable to Hexion Specialty Chemicals, Inc. of $6 million for the 2009 quarter versus $921 million in the prior year period. The fourth quarter 2009 loss reflected the same factors impacting operating results and lower interest expense.
  • Segment EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $106 million in the fourth quarter of 2009 compared to $46 million during the prior year period. (Note: Segment EBITDA is a non-GAAP financial measure and is defined and reconciled to Net (Loss) Income later in this release.)

Fiscal year 2009 results include:

  • Revenues of $4.0 billion versus $6.1 billion in 2008, with lower volumes accounting for $1.1 billion of the decline, the contractual pass through of lower raw material costs reducing sales by $791 million and unfavorable foreign currency translation of $167 million.
  • Operating income of $94 million versus an operating loss of $893 million in 2008. Full-year 2009 results primarily reflected a reduction in terminated merger and settlement expense as Hexion recorded $1,027 million in terminated merger and settlement costs in 2008. Hexion’s operating income also reflected the improvement in its gross profit as a percentage of net sales, which increased to 13 percent in 2009 compared to 10 percent in the prior year period. Operating income also benefited from a $48 million reduction in selling, general and administrative expenses in 2009 versus 2008.
  • The Company posted net income attributable to Hexion Specialty Chemicals, Inc. of $92 million in 2009 compared to a net loss of $1,190 million in 2008, which reflected a $224 million gain on the extinguishment of $298 million in face value of outstanding debt securities and $81 million in decreased interest costs.
  • Hexion recorded 2009 Segment EBITDA of $385 million versus $461 million in 2008. Adjusted EBITDA was $529 million for the year ended December 31, 2009. (Note: Segment EBITDA and Adjusted EBITDA are non-GAAP financial measures and defined and reconciled to net income (loss) later in this release.)

“We continued to close the revenue gap versus the prior year as our volumes increased by 5 percent in the fourth quarter of 2009 compared to the fourth quarter of 2008,” said Craig O. Morrison, Chairman, President and CEO. “Although certain end markets remain challenged, our Segment EBITDA has been recovering due to gradually improving volumes and the cumulative impact of our cost reduction and productivity initiatives. Our fourth quarter 2009 results were highlighted by strong performances in Specialty Epoxy and Phenolic resins, Versatic™ Acids and Derivatives, and our Oilfield resins, while our Coatings and Inks segment benefited from past restructuring efforts.”

Productivity and Synergy Update

Hexion achieved $51 million in productivity savings in the fourth quarter of 2009 as it continued to streamline operations and reduce its overall cost structure. In 2009, the Company achieved $148 million in total productivity actions. In addition, Hexion had $125 million of in-process productivity initiatives remaining as of December 31, 2009. The Company expects to incur net costs of $69 million to achieve the remaining productivity savings and it anticipates that the majority of the actions will occur over the next 18 months.

“In 2009, we reduced total costs by approximately $272 million broadly based across cost segments, such as utilities, variable manufacturing expense, salaries, travel, purchased services and other items, demonstrating how aggressively we reacted to the economic headwinds during the past year,” Morrison said. “In 2010, we are focused on achieving the remaining productivity savings and continuing to reduce costs as appropriate.”

Segment Results

Following are net sales and Segment EBITDA by reportable segment for the fourth quarter and twelve months ended December 31, 2009. Segment EBITDA is defined as EBITDA adjusted to exclude certain non-cash and non-recurring expenses. Segment EBITDA is the primary performance measure used by the Company to evaluate operating results and allocate resources among segments. Segment EBITDA is also the profitability measure used in management and executive incentive compensation programs. Corporate and Other primarily represents certain corporate, general and administrative expenses that are not allocated to the segments. (Note: Segment EBITDA is defined and reconciled to Net Income (loss) later in this release.)

Three months ended December 31,
Year ended December 31,
Net Sales to Unaffiliated Customers(1):
Epoxy and Phenolic Resins$457$446$1,702$2,432
Formaldehyde and Forest Product Resins3394051,1842,033
Coatings and Inks2192388881,248
Performance Products 74 89 256 380
$1,089 $1,178 $4,030 $6,093
Segment EBITDA
Epoxy and Phenolic Resins$51$(2)$190$192
Formaldehyde and Forest Product Resins3641108194
Coatings and Inks8(4)5835
Performance Products24238090
Corporate and Other(13)(12)(51)(50)
(1) Intersegment sales are not significant and, as such, are eliminated within the selling segment.
Reconciliation of Segment EBITDA to Net Income (Loss) (Unaudited)
(U.S. Dollars in Millions)

Three months ended

December 31,

Year ended

Dec. 31,

Segment EBITDA:
Epoxy and Phenolic Resins$51$(2)$190$192
Formaldehyde and Forest Product Resins3641108194
Coatings and Inks8(4)5835
Performance Products24238090
Corporate and Other(13)(12)(51)(50)
Items not included in Segment EBITDA
Terminated merger and settlement (expense) income, net1(800)40(1,027)
Integration and transaction costs(7)(27)
Non-cash charges103(5)
Unusual items:
(Losses) gains on divestiture of assets(4)(6)(6)5
Business realignments(3)(19)(56)(41)
Asset impairments(3)(21)(50)(21)
Derivative settlement(24)(37)
Other (12) 1 (45) (8)
Total unusual items (22) (69) (157) (102)
Total adjustments(21)(866)(114)(1,161)
Interest expense, net(51)(77)(223)(304)
Gain on extinguishment of debt1224
Income tax benefit (expense)522(2)17
Depreciation and amortization (46) (46) (178) (203)
Net (loss) income attributable to Hexion Specialty Chemicals, Inc.(6)(921)92(1,190)
Net income attributable to noncontrolling interest 2 1 3 5
Net (loss) income$(4)$(920)$95 $(1,185)


“We were pleased with our ability to generate cash flow from operations in 2009, which totaled $355 million, as well as our ability to reduce working capital by $303 million in the past year, with working capital as a percentage of sales of 9.3 percent,” Morrison said. “We will continue to focus aggressively on cash management going forward. We also improved our capital structure in 2009 through careful cash management, the repurchase of a portion of our debt securities and our recent refinancing, which provided incremental liquidity and extended a significant amount of our maturities.”

“Regarding customer demand, a high level of uncertainty remains in 2010, but we are guardedly optimistic that the signs of stabilization in several end markets will continue to drive a gradual improvement in our volumes. Regardless of market conditions, we are focused on creating value from the continued achievement of our productivity initiatives and growth from our specialty product applications. We also continue to strategically expand our operations in high growth international markets, such as the construction of a new plant at our Onsan, Korea site, which will support our Versatic Acids and Derivatives products.”

“Similar to 2009, we plan to focus on the items we can control in the coming year, including our cost-control initiatives, site restructurings, and serving our customers. We believe that as the economy recovers, Hexion is well positioned to benefit from its lower cost structure and global customer base.”

Liquidity and Capital Resources

At December 31, 2009, Hexion had $3.510 billion of debt. In addition, at December 31, 2009, Hexion had $367 million in liquidity including $135 million of unrestricted cash and cash equivalents, $183 million of borrowings available under our senior secured revolving credit facilities, and $49 million of borrowings available under additional credit facilities at certain domestic and international subsidiaries and an equity commitment from certain affiliates of Apollo Management, L.P.

As previously announced, Hexion entered into an amendment to its Senior Secured Credit Facilities during the first quarter of 2010. Under the amendment, Hexion extended the maturity of approximately $957 million of term loans from May 5, 2013 to May 5, 2015 and increased the interest rate with respect to such term loans from LIBOR plus 2.25 percent to LIBOR plus 3.75 percent. The Company also issued $1 billion aggregate principal amount of senior secured notes due 2018. The Company used the net proceeds of $993 million from the issue to repay $800 million of Hexion’s U.S. term loans under the Senior Secured Credit Facility, pay certain related transaction costs and expenses, and provide incremental liquidity of $162 million. Following the refinancing, Hexion’s pro forma liquidity at December 31, 2009 totaled $529 million.

In addition, in late December 2009 and early January 2010 Hexion renewed its revolving line of credit facility commitments from lenders, which will take effect upon the May 31, 2011 maturity of the existing revolving facility commitments. The new commitments, which total $200 million, will extend the availability of the revolver to 2013. The new revolving loans, which cannot be drawn until the existing revolving credit facility matures, will bear interest at a rate of LIBOR plus 4.50 percent.

At December 31, 2009, the Company was in compliance with the senior secured bank leverage ratio under the covenants for its senior secured bank facility. Hexion expects to have adequate liquidity to fund its ongoing operations for the foreseeable future from cash on its balance sheet, cash flows provided by operating activities, amounts available for borrowings under its credit facilities and amounts available from its parent.

Earnings Call

Hexion Specialty Chemicals, Inc. will host a teleconference to discuss Fourth Quarter and Fiscal Year 2009 results on Monday, March 22, 2010, at 1:00 p.m. Eastern Time.

Interested parties are asked to dial-in approximately 10 minutes before the call begins at the following numbers:

U.S. Participants: 800-510-0178

International Participants: 617-614-3450

Participant Passcode: 47133413

Live Internet access to the call and presentation materials will be available through the Investor Relations section of the Company’s website: www.hexion.com.

A replay of the call will be available for three weeks beginning at 4 p.m. Eastern Time on March 22, 2010. The playback can be accessed by dialing 888-286-8010 (U.S.) and 617-801-6888 (International). The passcode is 12806845. A replay also will be available through the Investor Relations Section of the Company’s website.

Reconciliation of Last Twelve Month Net Loss to Adjusted EBITDA

Adjusted EBITDA is defined as EBITDA further adjusted to exclude certain non-cash and certain non-recurring costs. Adjusted EBITDA also reflects other adjustments permitted in calculating compliance under the indentures governing certain of the Company's debt instruments and the Company's senior credit facility, including reflecting the expected future impact of announced acquisitions and in-process cost saving initiatives. Certain covenants and tests in these agreements (i) require the Company to maintain leverage ratio and (ii) restrict the Company's ability to take certain actions such as incurring additional debt or making certain acquisitions if the Company is unable to meet a fixed charge coverage ratio. Our senior credit facility requires that the Company’s ratio of senior secured debt to Adjusted EBITDA (measured on a trailing four-quarter basis) not exceed 4.25 to 1.00 as of the last day of each fiscal quarter. Senior secured debt is defined to include borrowings under our senior credit facility and certain other indebtedness secured by liens (not including indebtedness secured by second-priority liens or certain indebtedness of our foreign subsidiaries that are not loan parties to our senior credit facility). The test to incur additional indebtedness and the ability to make future acquisitions requires an Adjusted EBITDA to Fixed Charges ratio (measured on a trailing four-quarter basis) of 2.0:1.0. Fixed charges are defined as interest expense excluding the amortization or write-off of deferred financing costs. Failure to comply with these ratios can result in limiting long-term growth prospects by hindering the Company's ability to incur future indebtedness or grow through acquisitions. The Company believes that including the supplemental adjustments applied in presenting Adjusted EBITDA is appropriate to provide additional information to investors to demonstrate compliance with financial covenants and tests and assess the Company's future ability to incur additional indebtedness. Adjusted EBITDA and fixed charges are not defined terms under accounting principles generally accepted in the United States of America (US GAAP).

Adjusted EBITDA is not intended to represent any measure of earnings or cash flow in accordance with US GAAP and the Company's calculation and use of this measure may differ from other companies. These non-GAAP measures should not be used in isolation or as a substitute for measures of performance or liquidity. Adjusted EBITDA should not be considered an alternative to operating income or net loss under US GAAP to evaluate the Company's results of operations or as an alternative to cash flows as a measure of liquidity. Fixed Charges should not be considered an alternative to interest expense.

(U.S. Dollars in Millions)
Year Ended
Dec. 31,
Reconciliation of Net Income to Adjusted EBITDA
Net income$95
Income tax expense2
Interest expense, net223
Gain on extinguishment of debt(224)
Depreciation and amortization expense 178
Adjustments to EBITDA:
Terminated merger and settlement income(1)(40)
Net income attributable to noncontrolling interest(3)
Non-cash items(3)
Unusual items:
Loss on divestitures of assets6
Business realignments (2)56
Asset Impairments50
Other (3) 64
Total unusual items 176
Productivity program savings (4) 125
Adjusted EBITDA$529
Pro forma Fixed charges (5)$268
Pro forma ratio of Adjusted EBITDA to Fixed Charges(6) 1.97

(1) Represents negotiated reductions on accounting, consulting, tax and legal costs related to the terminated Huntsman merger and related litigation and recovery of $15 million in insurance proceeds related to the $200 million settlement payment made by Apollo that was treated as an expense of the Company in 2008. These amounts are partially offset by legal settlement accruals pertaining to the New York Shareholder Action related to the terminated Huntsman merger.

(2) Represents plant rationalization and headcount reduction expenses related to productivity programs and other costs associated with business realignments.

(3) Primarily includes realized foreign currency activity, pension expense related to formerly owned businesses, and business optimization expenses.

(4) Represents pro-forma impact of in-process productivity program savings.

(5) The charges reflect pro forma interest expense based on interest rates at February 24, 2010 as if our repurchases of our outstanding debt securities and the Offering and Amendment Transactions had taken place at the beginning of the period.

(6) We are required to have an Adjusted EBITDA to Fixed Charges ratio of greater than 2.0 to 1.0 to be able to incur additional indebtedness in certain circumstances under our indenture for the Second Priority Senior Secured Notes. As of December 31, 2009, the Company did not satisfy this test on a pro forma basis after adjusting for the January 2010 refinancing activities. Failure of this incurrence test does not represent an event of default. In certain circumstances, we may not be able to incur future debt outside of our revolving facility or make acquisitions until we are in compliance with this test.

Forward Looking Statements

Certain statements in this press release, including but not limited to those made under the caption “Outlook”, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In addition, the management of Hexion Specialty Chemicals, Inc. (which may be referred to as “Hexion,” “we,” “us,” “our” or the “Company”) may from time to time make oral forward-looking statements. Forward looking statements may be identified by the words “believe,” “expect,” “anticipate,” “project,” “plan,” “estimate,” “will” or “intend” or similar expressions. Forward-looking statements reflect our current expectations and assumptions regarding our businesses, the economy and other future conditions. Actual results could vary materially depending on risks and uncertainties that may affect our markets, services, prices and other factors as discussed in our most recent Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission (SEC). We caution you against relying on any forward-looking statements as they are neither statements of historical fact nor guarantees of future performance.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional or global economic, competitive and regulatory factors including, but not limited to, the current credit crises and global economic downturn, interruptions in the supply of or increased pricing of raw materials due to natural disasters, pricing actions by our competitors that could affect our operating margins, changes in governmental regulations involving our products, and the following:

  • our inability to achieve expected cost savings,
  • the outcome of litigation described in footnote 12 to our financial statements on Commitments and Contingencies,
  • our failure to comply with financial covenants under our credit facilities or other debt, and
  • the other factors described in the Risk Factors section of our Annual Report on Form 10-K and in our other SEC filings.

Any forward-looking statement made by us in this document speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time.

About Hexion Specialty Chemicals

Based in Columbus, Ohio, Hexion Specialty Chemicals serves the global wood and industrial markets through a broad range of thermoset technologies, specialty products and technical support for customers in a diverse range of applications and industries. Hexion Specialty Chemicals is controlled by an affiliate of Apollo Management, L.P. Additional information is available at www.hexion.com.

(See Attached Financial Statements)

Three mos. ended Dec. 31
(In millions)
2009 2008
Net sales$1,089$1,178
Cost of sales 946 1,101
Gross profit14377
Selling, general and administrative expense9190
Terminated merger and settlement (income) expense, net(1)800
Integration costs7
Asset impairments321
Business realignment costs319
Other operating expense, net 11 16
Operating income (loss)36(876)
Interest expense, net5177
Gain on extinguishment of debt(1)
Other non-operating expense, net (4) (11)
Loss before income tax and earnings from unconsolidated entities(10)(942)
Income tax benefit (5) (22)
Loss before earnings from unconsolidated entities(5)(920
Earnings from unconsolidated entities, net of taxes 1
Net loss(4)(920)
Net income attributable to noncontrolling interest (2) (1)
Net loss attributable to Hexion Specialty Chemicals, Inc.$(6)$(921)
Year ended Dec. 31
(In millions)
2009 2008
Net sales$4,030$6,093
Cost of sales 3,511 5,467
Gross profit519626
Selling, general and administrative expense345393
Terminated merger and settlement (income) expense, net(40)1,027
Integration costs27
Asset impairments5021
Business realignment costs5641
Other operating expense, net 14 10
Operating income (loss)94(893)
Interest expense, net223304
Gain on extinguishment of debt(224)
Other non-operating expense, net 7
Income (loss) before income tax and earnings from unconsolidated entities95(1,204)
Income tax expense (benefit) 2 (17)
Income (loss) before earnings from unconsolidated entities93(1,187)
Earnings from unconsolidated entities, net of taxes 2 2
Net income (loss)95(1,185)
Net income attributable to noncontrolling interest (3) (5)
Net income (loss) attributable to Hexion Specialty Chemicals, Inc.$92 $(1,190)
Comprehensive income (loss) attributable to Hexion Specialty Chemicals, Inc.$189 $(1,362)
(In millions, except share data)
Dec. 31,
Dec. 31,
Current assets
Cash and cash equivalents (including restricted cash of $7 and $6, respectively)
Short-term investments107
Accounts receivable (net of allowance for doubtful accounts of $25 and $24, respectively)478582
Finished and in-process goods264328
Raw materials and supplies115141
Other current assets 84 84
Total current assets 1,093 1,269
Other assets104108
Property and equipment
Machinery and equipment 2,368 2,157
Less accumulated depreciation (1,360) (1,101)
Other intangible assets, net 159 172
Total assets$2,973 $3,180
Liabilities and Deficit
Current liabilities
Accounts and drafts payable$481$372
Debt payable within one year78113
Affiliated loans payable4
Interest payable3651
Income taxes payable4234
Accrued payroll and incentive compensation5039
Other current liabilities 197 270
Total current liabilities888879
Long-term debt3,3283,746
Affiliated long-term debt100
Long-term pension and post employment benefit obligations233259
Deferred income taxes120122
Other long-term liabilities128128
Advance from affiliates 225 225
Total liabilities 5,022 5,359
Commitments and contingencies
Common stock - $0.01 par value; 300,000,000 shares authorized, 170,605,906 issued and 82,556,847 outstanding at December 31, 2009 and 200811
Paid-in capital507517
Treasury stock, at cost – 88,049,059 shares(296)(296)
Note receivable from parent(24)
Accumulated other comprehensive income992
Accumulated deficit (2,350) (2,442)
Total Hexion Specialty Chemicals, Inc. shareholder’s deficit (2,063) (2,218)
Noncontrolling interest 14 39
Total deficit (2,049) (2,179)
Total liabilities and deficit$2,973 $3,180
Year Ended Dec. 31,
(In millions)
2009 2008
Cash flows provided by (used in) operating activities
Net income (loss)$95$(1,185)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization178203
Gain on extinguishment of debt(224)
Push-down of (income) expense (recovered) paid by shareholder(15)200
Write-off of deferred acquisition costs101
Loss (gain) on disposal of assets, net of taxes6(3)
Stock-based compensation expense55
Deferred tax benefit(7)(13)
Non-cash impairments and accelerated depreciation5733
Cash settlement of derivatives37
Other non-cash adjustments(16)(6)
Net change in assets and liabilities, excluding acquisitions:
Accounts receivable128231
Accounts and drafts payable95(299)
Income taxes payable6(10)
Other assets, current and non-current28
Other liabilities, current and long-term (54) (33)
Net cash provided by (used in) operating activities 355 (632)
Cash flows used in investing activities
Capital expenditures(131)(134)
Capitalized interest(5)
Acquisition of businesses, net of cash acquired
Deferred acquisition costs
Change in restricted cash2(6)
Purchases of investments(2)(7)
Proceeds from the sale of assets 4 13
Net cash used in investing activities (132) (134)
Cash flows (used in) provided by financing activities
Net short-term debt (repayments) borrowings(10)8
Borrowings of long-term debt1,1551,092
Repayments of long-term debt(1,404)(929)
Borrowings of affiliated debt104
Purchase of note receivable due from parent(24)
Capital contribution from parent325
Advance from affiliates225
Payment of dividends on common stock(10)(2)
Long-term debt and credit facility financing fees(5)
(Deconsolidation) consolidation of noncontrolling interest in variable interest entity(24)24
Payment of dividends to noncontrolling interest holder(4)
Cash settlement of derivatives (37)
Net cash (used in) provided by financing activities (222) 706
Effect of exchange rates on cash and cash equivalents13(18)
Increase (decrease) in cash and cash equivalents14(78)
Cash and cash equivalents at beginning of year 121 199
Cash and cash equivalents (unrestricted) at end of year$135 $121

Outstanding Debt

Following is a summary of Hexion’s cash and cash equivalents and outstanding debt at December 31, 2009, as adjusted for the Amendment and Offering Transactions that were closed on January 29, 2010, and Hexion’s outstanding debt at December 31, 2008:

(In millions) As of December 31:
2009 2008
Actual Adjustments As AdjustedActual
Cash and cash equivalents
Non-affiliated debt:
Senior Secured Credit Facilities:
Revolving facility due 20113636180
Floating rate term loans due 20132,234(1,757)4772,254
Floating rate term loans due 2015957957
Senior Secured Notes:
8.875% senior secured notes due 2018 (net of original issue discount of $7)993993
Floating rate second-priority senior secured notes due 2014120120200
9.75% Second-priority senior secured notes due 2014533533625
9.2% debentures due 20217474115
7.875% debentures due 2023189189247
8.375% sinking fund debentures due 2016626278
Other Borrowings:
Australian Multi-Currency Term/Working Capital Facility due 2011545450
Brazilian bank loans656527
Industrial Revenue Bonds due 200934
Capital Leases151515
Other 24 24 34
Total non-affiliated debt3,4061933,5993,859
Affiliated debt:
Affiliated borrowings due on demand44
Affiliated term loan due 2011 100 100
Total affiliated debt 104 104
Total debt$3,510 193 $3,703$3,859


Hexion Specialty Chemicals, Inc.
John Kompa, Director, Investor Relations, 614-225-2223
Peter F. Loscocco, Vice President, Public Affairs, 614-225-4127