Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Reporting Disclosure [Text Block]

Segment Information

In the first quarter of 2011, the Company completed the sale of the IAR business and moved the oversight and management of the coatings reporting unit into the Epoxy and Phenolic Resins Division, which was renamed the Epoxy, Phenolic and Coating Resins Division. These organizational and internal reporting changes caused the Company to re-evaluate its reportable segments. As a result of these changes, effective in the first quarter of 2011, the results of the Company’s coatings reporting unit, which were previously reported in the Coatings segment, are included within the Epoxy, Phenolic and Coating Resins segment. The prior periods have been recast for comparability purposes. In addition, the Company has renamed its Formaldehyde and Forest Products Resins segment to Forest Products Resins. No changes were made to the product lines that comprise this segment.

The Company's business segments are based on the products that the Company offers and the markets that it serves. At September 30, 2011, the Company had two reportable segments: Epoxy, Phenolic and Coating Resins and Forest Products Resins. A summary of the major products of the Company's reportable segments follows:

• Epoxy, Phenolic and Coating Resins: epoxy specialty resins, oil field products, versatic acids and derivatives, basic epoxy resins and intermediates, phenolic specialty resins and molding compounds, polyester resins, acrylic resins and vinylic resins

• Forest Products Resins: forest products resins and formaldehyde applications

In the second quarter of 2011, the Company sold its North American coatings and composites resins (“CCR”) business to PCCR USA, Inc. ("PCCR"), a subsidiary of Investindustrial, a European investment group. The CCR business was previously included in the Coatings segment in 2010 and the Epoxy, Phenolic and Coating Resins segment beginning in 2011 as a result of the change in the Company's reportable segments discussed above. The CCR business is reported as a discontinued operation for all periods presented.

Reportable Segments

Following are net sales and Segment EBITDA (earnings before interest, income taxes, depreciation and amortization) by reportable segment. Segment EBITDA is defined as EBITDA adjusted to exclude certain non-cash, other income and expenses and discontinued operations. Segment EBITDA is the primary performance measure used by the Company's senior management, the chief operating decision-maker and the 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 is primarily corporate general and administrative expenses that are not allocated to the segments, such as shared service and administrative functions, foreign exchange gains and losses and legacy company costs not allocated to continuing segments.

Total assets by segment has been disclosed below due to the changes to the Company's reportable segments in the first quarter of 2011.

Net Sales to Unaffiliated Customers⁽¹⁾⁽²⁾:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Epoxy, Phenolic and Coating Resins	$	870	$	827	$	2,688	$	2,222
Forest Products Resins	452		398		1,366		1,206
Total	$	1,322	$	1,225	$	4,054	$	3,428

Segment EBITDA⁽²⁾:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Epoxy, Phenolic and Coating Resins	$	126		$	169		$	433		$	374
Forest Products Resins	46			46			141			138
Corporate and Other	(10		)	(22		)	(45		)	(48		)

Total Assets⁽²⁾:

	As of September 30, 2011		As of December 31, 2010
Epoxy, Phenolic and Coating Resins	$	1,950	$	1,815
Forest Products Resins	835		849
Corporate and Other	340		230
Discontinued Operations	—		243
Total	$	3,125	$	3,137

(1) Intersegment sales are not significant and, as such, are eliminated within the selling segment.

(2) The Company changed its reportable segments in the first quarter of 2011. Prior period balances have been recast to conform to the Company's current reportable segments and to exclude the results of the CCR business, which is reported as a discontinued operation for all periods presented.

Reconciliation of Segment EBITDA to Net Income:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Segment EBITDA:
Epoxy, Phenolic and Coating Resins	$	126		$	169		$	433		$	374
Forest Products Resins	46			46			141			138
Corporate and Other	(10		)	(22		)	(45		)	(48		)
Reconciliation:
Items not included in Segment EBITDA
Push-down of income recovered by owner	—			56			—			83
Asset impairments and other non-cash charges	(2		)	(3		)	(23		)	(8		)
Business realignment costs	(1		)	(6		)	(9		)	(15		)
Integration costs	(5		)	—			(10		)	—
Net (loss) income from discontinued operations	—			(2		)	2			5
Other	(10		)	(6		)	(3		)	(11		)
Total adjustments	(18		)	39			(43		)	54
Loss on extinguishment of debt	—			—			—			(8		)
Interest expense, net	(67		)	(70		)	(196		)	(205		)
Income tax benefit (expense)	5			(6		)	2			(23		)
Depreciation and amortization	(43		)	(40		)	(127		)	(121		)
Net income	$	39		$	116		$	165		$	161

Items not included in Segment EBITDA

Non-cash charges primarily represent stock-based compensation expense and unrealized derivative and foreign exchange gains and losses.

Not included in Segment EBITDA are certain non-cash and other income or expenses. For the three and nine months ended September 30, 2011, these items include business optimization expenses, retention program costs, business realignment costs primarily related to expenses from the Company's productivity program, integration costs related to the Momentive Combination and realized foreign exchange gains and losses. For the nine months ended September 30, 2011, these amounts also include a gain recognized on the termination of an operator agreement with a customer. Discontinued operations represents the results of the Company's IAR and CCR businesses. For the three and nine months ended September 30, 2010, these items consisted of business realignment costs primarily related to expenses from the Company's productivity program, realized foreign exchange gains and losses, business optimization expenses and retention program costs. Discontinued operations represents the results of the Company's IAR and CCR businesses. For the nine months ended September 30, 2010, these items also include insurance settlements related to previous litigation matters.