Guarantor Non-Guarantor Subsidary Financial Information

9 Months Ended

Sep. 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 SEPTEMBER 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	$	567		$	—		$	—		$	828		$	(73	)	$	1,322
Cost of sales	470			—			—			740			(73		)	1,137
Gross profit	97			—			—			88			—			185
Selling, general and administrative expense	30			—			—			52			—			82
Other operating (income) expense, net	(3		)	—			—			5			—			2
Operating income	70			—			—			31			—			101
Interest expense, net	17			38			—			12			—			67
Intercompany interest expense (income)	29			(41		)	—			12			—			—
Other non-operating expense (income), net	35			—			1			(31		)	—			5
(Loss) income from continuing operations before income tax, earnings from unconsolidated entities	(11		)	3			(1		)	38			—			29
Income tax expense (benefit)	5			(1		)	—			(9		)	—			(5		)
(Loss) income from continuing operations before earnings from unconsolidated entities	(16		)	4			(1		)	47			—			34
Earnings from unconsolidated entities, net of taxes	55			—			29			—			(79		)	5
Net income	$	39		$	4		$	28		$	47		$	(79	)	$	39

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED SEPTEMBER 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	$	512		$	—		$	—		$	763		$	(50	)	$	1,225
Cost of sales	369			—			—			670			(50		)	989
Gross profit	143			—			—			93			—			236
Selling, general and administrative expense	42			—			—			51			—			93
Push-down of income recovered by owner	(56		)	—			—			—			—			(56		)
Other operating expense, net	2			—			—			9			—			11
Operating income	155			—			—			33			—			188
Interest expense, net	23			37			—			10			—			70
Intercompany interest expense (income)	32			(43		)	(1		)	12			—			—
Other non-operating (income) expense, net	(2		)	3			—			(5		)	—			(4		)
Income from continuing operations before income tax, earnings from unconsolidated entities	102			3			1			16			—			122
Income tax (benefit) expense	(6		)	—			—			12			—			6
Income from continuing operations before earnings from unconsolidated entities	108			3			1			4			—			116
Earnings (loss) from unconsolidated entities, net of taxes	6			—			(1		)	1			(4		)	2
Net income from continuing operations	114			3			—			5			(4		)	118
Net income (loss) from discontinued operations, net of tax	2			—			—			(4		)	—			(2		)
Net income	$	116		$	3		$	—		$	1		$	(4	)	$	116

MOMENTIVE SPECIALTY CHEMICALS INC.

NINE MONTHS ENDED SEPTEMBER 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	$	1,747		$	—		$	—	$	2,553	$	(246	)	$	4,054
Cost of sales	1,425			—			—		2,266		(246		)	3,445
Gross profit	322			—			—		287		—			609
Selling, general and administrative expense	94			—			—		159		—			253
Asset impairments	—			—			—		18		—			18
Other operating (income) expense, net	(22		)	—			—		11		—			(11		)
Operating income	250			—			—		99		—			349
Interest expense, net	52			113			—		31		—			196
Intercompany interest expense (income)	93			(131		)	—		38		—			—
Other non-operating (income) expense, net	(1		)	—			—		4		—			3
Income from continuing operations before income tax, earnings from unconsolidated entities	106			18			—		26		—			150
Income tax (benefit) expense	(14		)	1			—		11		—			(2		)
Income from continuing operations before earnings from unconsolidated entities	120			17			—		15		—			152
Earnings from unconsolidated entities, net of taxes	63			—			44		—		(96		)	11
Net income from continuing operations	183			17			44		15		(96		)	163
Net (loss) income from discontinued operations, net of tax	(18		)	—			—		20		—			2
Net income	$	165		$	17		$	44	$	35	$	(96	)	$	165

MOMENTIVE SPECIALTY CHEMICALS INC.

NINE MONTHS ENDED SEPTEMBER 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	$	1,505		$	—		$	—		$	2,196		$	(273	)	$	3,428
Cost of sales	1,219			—			—			1,922			(273		)	2,868
Gross profit	286			—			—			274			—			560
Selling, general and administrative expense	95			—			—			156			—			251
Push-down of income recovered by owner	(83		)	—			—			—			—			(83		)
Other operating (income) expense, net	(4		)	—			—			11			—			7
Operating income	278			—			—			107			—			385
Interest expense, net	71			105			—			29			—			205
Intercompany interest expense (income)	95			(124		)	(1		)	30			—			—
Loss on extinguishment of debt	8			—			—			—			—			8
Other non-operating (income) expense, net	(8		)	8			—			(1		)	—			(1		)
Income from continuing operations before income tax, earnings from unconsolidated entities	112			11			1			49			—			173
Income tax (benefit) expense	(3		)	1			—			25			—			23
Income from continuing operations before earnings from unconsolidated entities	115			10			1			24			—			150
Earnings from unconsolidated entities, net of taxes	45			—			12			1			(52		)	6
Net income from continuing operations	160			10			13			25			(52		)	156
Net income from discontinued operations, net of tax	1			—			—			4			—			5
Net income	$	161		$	10		$	13		$	29		$	(52	)	$	161

MOMENTIVE SPECIALTY CHEMICALS INC.

SEPTEMBER 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 $3, respectively)	$	70		$	—		$	—		$	101		$	—		$	171
Short-term investments	—			—			—			9			—			9
Accounts receivable, net	214			—			—			489			—			703
Inventories:										—
Finished and in-process goods	141			—			—			190			—			331
Raw materials and supplies	47			—			—			89			—			136
Other current assets	24			—			—			63			—			87
Total current assets	496			—			—			941			—			1,437
Other assets, net	49			38			65			79			(69		)	162
Property and equipment, net	515			—			—			735			—			1,250
Goodwill	93			—			—			75			—			168
Other intangible assets, net	60			—			—			48			—			108
Total assets	$	1,213		$	38		$	65		$	1,878		$	(69	)	$	3,125
Liabilities and (Deficit) Equity
Current liabilities
Accounts and drafts payable	$	170		$	—		$	—		$	282		$	—		$	452
Intercompany accounts (receivable) payable	(147		)	(35		)	—			182			—			—
Debt payable within one year	18			—			—			82			—			100
Intercompany loans payable (receivable)	44			—			—			(44		)	—			—
Loans payable to affiliates	2			—			—			—			—			2
Interest payable	10			35			—			2			—			47
Income taxes payable	1			—			—			9			—			10
Accrued payroll and incentive compensation	26			—			—			38			—			64
Other current liabilities	74			—			—			57			—			131
Total current liabilities	198			—			—			608			—			806
Long-term debt	1,138			1,688			—			602			—			3,428
Affiliated long-term debt	80			—			—			20			—			100
Intercompany loans payable (receivable)	1,238			(1,901		)	(14		)	677			—			—
Long-term pension and post employment benefit obligations	71			—			—			127			—			198
Deferred income taxes	27			2			—			66			—			95
Other long-term liabilities	115			6			—			30			—			151
Advance from affiliates	225			—			—			—			—			225
Total liabilities	3,092			(205		)	(14		)	2,130			—			5,003
Total Momentive Specialty Chemicals Inc. shareholders (deficit) equity	(1,879		)	243			79			(253		)	(69		)	(1,879		)
Noncontrolling interest	—			—			—			1			—			1
Total (deficit) equity	(1,879		)	243			79			(252		)	(69		)	(1,878		)
Total liabilities and (deficit) equity	$	1,213		$	38		$	65		$	1,878		$	(69	)	$	3,125

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, net	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.

NINE MONTHS ENDED SEPTEMBER 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	$	(112	)	$	1		$	1		$	73		$	—		$	(37	)
Cash flows provided by (used in) investing activities
Capital expenditures	(63		)	—			—			(46		)	—			(109		)
Purchases of marketable securities	—			—			—			(3		)	—			(3		)
Change in restricted cash	—			—			—			3			—			3
Dividends from unconsolidated affiliates, net of funds remitted	9			—			8			(4		)	(9		)	4
Dividend from subsidiary	54			—			—			—			(54		)	—
Proceeds from sale of business, net of cash transferred	173			—			—			—			—			173
Proceeds from sale of assets	2			—			—			1			—			3
Proceeds from the return of capital from subsidiary	52			—			—			—			(52		)	—
	227			—			8			(49		)	(115		)	71
Cash flows used in financing activities
Net short-term debt borrowings	(9		)	—			—			20			—			11
Borrowings of long-term debt	164			—			—			291			—			455
Repayments of long-term debt	(177		)	—			—			(330		)	—			(507		)
Net intercompany loan (repayments)borrowings	(77		)	4			—			73			—			—
Long-term debt and credit facility financing fees	(1		)	—			—			—			—			(1		)
Common stock dividends paid	(1		)	(5		)	(9		)	(49		)	63			(1		)
Return of capital to parent	—			—			—			(52		)	52			—
	(101		)	(1		)	(9		)	(47		)	115			(43		)
Effect of exchange rates on cash and cash equivalents	—			—			—			(3		)	—			(3		)
Increase (decrease) in cash and cash equivalents	14			—			—			(26		)	—			(12		)
Cash and cash equivalents (unrestricted) at beginning of period	56			—			—			124			—			180
Cash and cash equivalents (unrestricted) at end of period	$	70		$	—		$	—		$	98		$	—		$	168

MOMENTIVE SPECIALTY CHEMICALS INC.

NINE MONTHS ENDED SEPTEMBER 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	$	(333	)	(a)	$	14		$	(4	)	$	248		(a)	$	—		$	(75	)
Cash flows provided by (used in) investing activities
Capital expenditures	(34		)		—			—			(40		)		—			(74		)
Capitalized interest	—				—			—			(1		)		—			(1		)
Proceeds from matured debt securities	—				—			—			3				—			3
Change in restricted cash	—				—			—			1				—			1
Proceeds from the return of capital from subsidiary	296			(a)	—			—			—				(296		)	—
Dividend from subsidiary	18				—			1			—				(19		)	—
Deconsolidation of variable interest entities	—				—			—			(4		)		—			(4		)
Investment in unconsolidated affiliates, net	—				—			3			2				—			5
Proceeds from the sale of assets	6				—			—			7				—			13
	286				—			4			(32		)		(315		)	(57		)
Cash flows provided by (used in) financing activities
Net short-term debt borrowings (repayments)	6				—			—			(3		)		—			3
Borrowings of long-term debt	240				993			—			470				—			1,703
Repayments of long-term debt	(1,054		)		—			—			(501		)		—			(1,555		)
Return of capital to parent	—				—			—			(296		)	(a)	296			—
Net intercompany loan borrowings (repayments)	879				(973		)	5			89				—			—
Long-term debt and credit facility financing fees	(1		)		(24		)	—			(8		)		—			(33		)
Payments of dividends on common stock	—				(10		)	(5		)	(4		)		19			—
	70				(14		)	—			(253		)		315			118
Effect of exchange rates on cash and cash equivalents	—				—			—			1				—			1
Increase (decrease) in cash and cash equivalents	23				—			—			(36		)		—			(13		)
Cash and cash equivalents (unrestricted) at beginning of period	22				—			—			113				—			135
Cash and cash equivalents (unrestricted) at end of period	$	45			$	—		$	—		$	77			$	—		$	122

(a) In March, June and September 2010, Momentive Specialty Chemicals Inc. contributed receivables of $100, $100 and $107, respectively, to a non-guarantor subsidiary as capital contributions, resulting in a non-cash transaction. During the nine months ended September 30, 2010, the non-guarantor subsidiary sold $307 of the contributed receivables to affiliates of Apollo for net cash of $296. 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.