Guarantor Non-Guarantor Subsidary Financial Information

6 Months Ended

Jun. 30, 2011

Guarantor Non Guarantor Subsidary Financial Information [Abstract]

Guarantees [Text Block]

Guarantor/Non-Guarantor Subsidiary Financial Information

The Company and certain of its U.S. subsidiaries guarantee debt issued by its wholly owned subsidiaries Hexion Nova Scotia, ULC and Hexion U.S. Finance Corporation (together, the “Subsidiary Issuers”), which includes the 8.875% first priority senior secured notes due 2018, the floating rate second-priority senior secured notes due 2014 and the 9% second-priority notes due 2020.

The following information contains the condensed consolidating financial information for MSC (the parent), the Subsidiary Issuers, the combined subsidiary guarantors (Momentive Specialty Chemical Investments Inc.; Borden Chemical Foundry; LLC, Lawter International, Inc.; HSC Capital Corporation; Momentive International, Inc.; Momentive CI Holding Company; NL COOP Holdings LLC and Oilfield Technology Group, Inc.) and the combined non-guarantor subsidiaries, which includes all of the Company’s foreign subsidiaries.

All of the subsidiary issuers and subsidiary guarantors are 100% owned by MSC. All guarantees are full and unconditional, and are joint and several. There are no significant restrictions on the ability of the Company to obtain funds from its domestic subsidiaries by dividend or loan. While the Company’s Australian, New Zealand and Brazilian subsidiaries are restricted in the payment of dividends and intercompany loans due to the terms of their credit facilities, there are no material restrictions on the Company’s ability to obtain cash from the remaining non-guarantor subsidiaries.

This information includes allocations of corporate overhead to the combined non-guarantor subsidiaries based on net sales. Income tax expense has been provided on the combined non-guarantor subsidiaries based on actual effective tax rates.

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED JUNE 30, 2011

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	617		$	—		$	—		$	912		$	(91	)	$	1,438
Cost of sales	488			—			—			826			(91		)	1,223
Gross profit	129			—			—			86			—			215
Selling, general and administrative expense	34			—			—			53			—			87
Asset impairments	—			—			—			18			—			18
Other operating income, net	(4		)	—			—			(14		)	—			(18		)
Operating income	99			—			—			29			—			128
Interest expense, net	17			38			—			10			—			65
Intercompany interest expense (income)	35			(48		)	—			13			—			—
Other non-operating (income) expense, net	(9		)	—			—			9			—			—
Income (loss) from continuing operations before income tax, earnings from unconsolidated entities	56			10			—			(3		)	—			63
Income tax (benefit) expense	(11		)	1			—			10			—			—
Income (loss) from continuing operations before earnings from unconsolidated entities	67			9			—			(13		)	—			63
Earnings from unconsolidated entities, net of taxes	(3		)	—			(3		)	—			9			3
Net income (loss) from continuing operations	64			9			(3		)	(13		)	9			66
Net loss from discontinued operations, net of tax	(1		)	—			—			(2		)	—			(3		)
Net income (loss)	$	63		$	9		$	(3	)	$	(15	)	$	9		$	63

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED JUNE 30, 2010

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	534		$	—		$	—	$	743		$	(121	)	$	1,156
Cost of sales	450			—			—		640			(121		)	969
Gross profit	84			—			—		103			—			187
Selling, general and administrative expense	28			—			—		57			—			85
Push-down of income recovered by owner	(28		)	—			—		—			—			(28		)
Other operating income, net	—			—			—		(2		)	—			(2		)
Operating income	84			—			—		48			—			132
Interest expense, net	23			38			—		11			—			72
Intercompany interest expense (income)	34			(44		)	—		10			—			—
Other non-operating (income) expense, net	(4		)	2			—		5			—			3
Income from continuing operations before income tax, earnings from unconsolidated entities	31			4			—		22			—			57
Income tax expense	2			1			—		10			—			13
Income from continuing operations before earnings from unconsolidated entities	29			3			—		12			—			44
Earnings from unconsolidated entities, net of taxes	23			—			12		—			(33		)	2
Net income from continuing operations	52			3			12		12			(33		)	46
Net income from discontinued operations, net of tax	—			—			—		6			—			6
Net income	$	52		$	3		$	12	$	18		$	(33	)	$	52

MOMENTIVE SPECIALTY CHEMICALS INC.

SIX MONTHS ENDED JUNE 30, 2011

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	1,180		$	—		$	—		$	1,725		$	(173	)	$	2,732
Cost of sales	955			—			—			1,526			(173		)	2,308
Gross profit	225			—			—			199			—			424
Selling, general and administrative expense	64			—			—			107			—			171
Asset impairments	—			—			—			18			—			18
Other operating (income) expense, net	(19		)	—			—			6			—			(13		)
Operating income	180			—			—			68			—			248
Interest expense, net	35			75			—			19			—			129
Intercompany interest expense (income)	64			(90		)	—			26			—			—
Other non-operating (income) expense, net	(36		)	—			(1		)	35			—			(2		)
Income (loss) from continuing operations before income tax, earnings from unconsolidated entities	117			15			1			(12		)	—			121
Income tax (benefit) expense	(19		)	2			—			20			—			3
Income (loss) from continuing operations before earnings from unconsolidated entities	136			13			1			(32		)	—			118
Earnings from unconsolidated entities, net of taxes	8			—			15			—			(17		)	6
Net income (loss) from continuing operations	144			13			16			(32		)	(17		)	124
Net (loss) income from discontinued operations, net of tax	(18		)	—			—			20			—			2
Net income (loss)	$	126		$	13		$	16		$	(12	)	$	(17	)	$	126

MOMENTIVE SPECIALTY CHEMICALS INC.

SIX MONTHS ENDED JUNE 30, 2010

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors		Combined Non-Guarantor Subsidiaries		Eliminations			Consolidated
Net sales	$	993		$	—		$	—	$	1,433	$	(223	)	$	2,203
Cost of sales	850			—			—		1,252		(223		)	1,879
Gross profit	143			—			—		181		—			324
Selling, general and administrative expense	53			—			—		105		—			158
Push-down of income recovered by owner	(28		)	—			—		—		—			(28		)
Other operating (income) expense, net	(5		)	—			—		2		—			(3		)
Operating income	123			—			—		74		—			197
Interest expense, net	48			68			—		19		—			135
Intercompany interest expense (income)	63			(81		)	—		18		—			—
Loss on extinguishment of debt	8			—			—		—		—			8
Other non-operating (income) expense, net	(6		)	5			—		4		—			3
Income from continuing operations before income tax, earnings from unconsolidated entities	10			8			—		33		—			51
Income tax expense	3			1			—		13		—			17
Income from continuing operations before earnings from unconsolidated entities	7			7			—		20		—			34
Earnings from unconsolidated entities, net of taxes	39			—			13		—		(48		)	4
Net income from continuing operations	46			7			13		20		(48		)	38
Net (loss) income from discontinued operations, net of tax	(1		)	—			—		8		—			7
Net income	$	45		$	7		$	13	$	28	$	(48	)	$	45

MOMENTIVE SPECIALTY CHEMICALS INC.

JUNE 30, 2011

CONDENSED CONSOLIDATING BALANCE SHEET (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents (including restricted cash of $0 and $4, respectively)	$	64		$	—		$	—		$	132		$	—		$	196
Short-term investments	—			—			—			6			—			6
Accounts receivable, net	238			—			—			573			—			811
Inventories:
Finished and in-process goods	153			—			—			193			—			346
Raw materials and supplies	46			—			—			93			—			139
Other current assets	19			—			—			67			—			86
Total current assets	520			—			—			1,064			—			1,584
Other assets
Other assets	9			39			41			95			(19		)	165
	9			39			41			95			(19		)	165
Property and equipment, net	514			—			—			809			—			1,323
Goodwill	93			—			—			82			—			175
Other intangible assets, net	62			—			—			54			—			116
Total assets	$	1,198		$	39		$	41		$	2,104		$	(19	)	$	3,363
Liabilities and (Deficit) Equity
Current liabilities
Accounts and drafts payable	$	186		$	—		$	—		$	393		$	—		$	579
Intercompany accounts (receivable) payable	(169		)	(42		)	—			211			—			—
Debt payable within one year	17			—			—			72			—			89
Intercompany loans (receivable) payable	(36		)	—			—			36			—			—
Loans payable to affiliates	2			—			—			—			—			2
Interest payable	13			44			—			2			—			59
Income taxes payable	—			2			—			18			—			20
Accrued payroll and incentive compensation	30			—			—			32			—			62
Other current liabilities	73			—			—			70			—			143
Total current liabilities	116			4			—			834			—			954
Long-term debt	1,143			1,687			—			620			—			3,450
Affiliated long-term debt	80			—			—			20			—			100
Intercompany loans payable (receivable)	1,259			(1,907		)	(15		)	663			—			—
Long-term pension and post employment benefit obligations	76			—			—			137			—			213
Deferred income taxes	25			2			—			80			—			107
Other long-term liabilities	117			6			—			33			—			156
Advance from affiliates	225			—			—			—			—			225
Total liabilities	3,041			(208		)	(15		)	2,387			—			5,205
Total Momentive Specialty Chemicals Inc. shareholders (deficit) equity	(1,843		)	247			56			(284		)	(19		)	(1,843		)
Noncontrolling interest	—			—			—			1			—			1
Total (deficit) equity	(1,843		)	247			56			(283		)	(19		)	(1,842		)
Total liabilities and (deficit) equity	$	1,198		$	39		$	41		$	2,104		$	(19	)	$	3,363

MOMENTIVE SPECIALTY CHEMICALS INC.

DECEMBER 31, 2010

CONDENSED CONSOLIDATING BALANCE SHEET

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations		Consolidated
Assets
Current assets
Cash and cash equivalents (including restricted cash of $0 and $6, respectively)	$	56		$	—		$	—		$	130		$	—	$	186
Short-term investments	—			—			—			6			—		6
Accounts receivable, net	115			—			—			412			—		527
Inventories:
Finished and in-process goods	122			—			—			144			—		266
Raw materials and supplies	35			—			—			74			—		109
Other current assets	31			—			—			48			—		79
Discontinued operations	102			—			—			141			—		243
Total current assets	461			—			—			955			—		1,416
Other assets
Other assets	6			41			30			73			3		153
Property and equipment, net	497			—			—			770			—		1,267
Goodwill	93			—			—			76			—		169
Other intangible assets, net	62			—			—			70			—		132
Total assets	$	1,119		$	41		$	30		$	1,944		$	3	$	3,137
Liabilities and (Deficit) Equity
Current liabilities
Accounts and drafts payable	$	137		$	—		$	—		$	277		$	—	$	414
Intercompany accounts (receivable) payable	(140		)	(46		)	—			186			—		—
Debt payable within one year	25			—			—			57			—		82
Intercompany loans (receivable) payable	(97		)	—			—			97			—		—
Loans payable to affiliates	2			—			—			—			—		2
Interest payable	21			46			—			2			—		69
Income taxes payable	7			—			—			17			—		24
Accrued payroll and incentive compensation	28			—			—			37			—		65
Other current liabilities	90			—			—			60			—		150
Discontinued operations	37			—			—			22			—		59
Total current liabilities	110			—			—			755			—		865
Long-term debt	1,152			1,687			—			649			—		3,488
Affiliated long-term debt	80			—			—			20			—		100
Intercompany loans payable (receivable)	1,352			(1,887		)	(15		)	550			—		—
Long-term pension and post employment benefit obligations	83			—			—			125			—		208
Deferred income taxes	35			2			—			73			—		110
Other long-term liabilities	104			6			—			50			—		160
Advance from affiliates	225			—			—			—			—		225
Total liabilities	3,141			(192		)	(15		)	2,222			—		5,156
Total Momentive Specialty Chemicals Inc. shareholders (deficit) equity	(2,022		)	233			45			(281		)	3		(2,022		)
Noncontrolling interest	—			—			—			3			—		3
Total (deficit) equity	(2,022		)	233			45			(278		)	3		(2,019		)
Total liabilities and (deficit) equity	$	1,119		$	41		$	30		$	1,944		$	3	$	3,137

MOMENTIVE SPECIALTY CHEMICALS INC.

SIX MONTHS ENDED JUNE 30, 2011

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(97	)	$	—		$	1		$	53		$	—		$	(43	)
Cash flows provided by (used in) investing activities
Capital expenditures	(46		)	—			—			(25		)	—			(71		)
Change in restricted cash	—			—			—			2			—			2
Funds remitted to unconsolidated affiliates, net of dividend	5			—			4			(5		)	(5		)	(1		)
Dividend from subsidiary	51			—			—			—			(51		)	—
Proceeds from sale of business, net of cash transferred	173			—			—			—			—			173
Proceeds from the return of capital from subsidiary	33			—			—			—			(33		)	—
	216			—			4			(28		)	(89		)	103
Cash flows (used in) provided by financing activities
Net short-term debt repayments	(8		)	—			—			—			—			(8		)
Borrowings of long-term debt	144			—			—			265			—			409
Repayments of long-term debt	(153		)	—			—			(298		)	—			(451		)
Common stock dividends paid	—			(4		)	(5		)	(47		)	56			—
Net intercompany loan (repayments)borrowings	(93		)	4			—			89			—			—
Long-term debt and credit facility financing fees	(1		)	—			—			—			—			(1		)
Return of capital to parent	—			—			—			(33		)	33			—
	(111		)	—			(5		)	(24		)	89			(51		)
Effect of exchange rates on cash and cash equivalents	—			—			—			3			—			3
Increase in cash and cash equivalents	8			—			—			4			—			12
Cash and cash equivalents (unrestricted) at beginning of period	56			—			—			124			—			180
Cash and cash equivalents (unrestricted) at end of period	$	64		$	—		$	—		$	128		$	—		$	192

MOMENTIVE SPECIALTY CHEMICALS INC.

SIX MONTHS ENDED JUNE 30, 2010

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)

	Momentive Specialty Chemicals Inc.				Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries				Eliminations			Consolidated
Cash flows (used in) provided by operating activities	$	(232	)	(a)	$	12		$	(5	)	$	117		(a)	$	—		$	(108	)
Cash flows provided by (used in) investing activities
Capital expenditures	(23		)		—			—			(24		)		—			(47		)
Capitalized interest	—				—			—			(1		)		—			(1		)
Purchases of debt securities	—				—			—			(2		)		—			(2		)
Change in restricted cash	—				—			—			4				—			4
Proceeds from the return of capital from subsidiary	190			(a)	—			—			—				(190		)	—
Deconsolidation of variable interest entities	—				—			—			(4		)		—			(4		)
Dividend from subsidiary	11				—			3			—				(11		)	3
Proceeds from the sale of assets	6				—			—			6				—			12
	184				—			3			(21		)		(201		)	(35		)
Cash flows provided by (used in) financing activities
Net short-term debt (repayments) borrowings	(4		)		—			—			4				—			—
Borrowings of long-term debt	130				993			—			256				—			1,379
Repayments of long-term debt	(939		)		—			—			(283		)		—			(1,222		)
Return of capital to parent	—				—			—			(190		)	(a)	190			—
Net intercompany loan borrowings (repayments)	853				(973		)	5			115				—			—
Long-term debt and credit facility financing fees	(1		)		(24		)	—			(8		)		—			(33		)
Payments of dividends on common stock	—				(8		)	(3		)	—				11			—
	39				(12		)	2			(106		)		201			124
Effect of exchange rates on cash and cash equivalents	—				—			—			(4		)		—			(4		)
Decrease in cash and cash equivalents	(9		)		—			—			(14		)		—			(23		)
Cash and cash equivalents (unrestricted) at beginning of period	22				—			—			113				—			135
Cash and cash equivalents (unrestricted) at end of period	$	13			$	—		$	—		$	99			$	—		$	112

(a) In both March and June 2010, Momentive Specialty Chemicals Inc. contributed receivables of $100 to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the six months ended June 30, 2010, the non-guarantor subsidiary sold $200 of the contributed receivables to affiliates of Apollo for net cash of $190. The cash proceeds were returned to Momentive Specialty Chemicals Inc. by the non-guarantor subsidiary as a return of capital. The sale of receivables has been included within cash flows from operating activities on the Combined Non-Guarantor Subsidiaries. The return of the cash proceeds from the sale of receivables has been included as a financing outflow and an investing inflow on the Combined Non-Guarantor Subsidiaries and Momentive Specialty Chemicals Inc., respectively.