Segment Information

9 Months Ended

Sep. 30, 2012

Segment Information [Abstract]

Segment Reporting Disclosure [Text Block]

Segment Information

The Company's business segments are based on the products that the Company offers and the markets that it serves. At September 30, 2012, 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

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 for certain non-cash items, 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.

Net Sales to Unaffiliated Customers⁽¹⁾:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Epoxy, Phenolic and Coating Resins	$	751	$	870	$	2,341	$	2,688
Forest Products Resins	426		452		1,331		1,366
Total	$	1,177	$	1,322	$	3,672	$	4,054

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

Segment EBITDA:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Epoxy, Phenolic and Coating Resins	$	76		$	126		$	291		$	433
Forest Products Resins	49			46			151			141
Corporate and Other	(10		)	(10		)	(36		)	(45		)

Reconciliation of Segment EBITDA to Net Income:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Segment EBITDA:
Epoxy, Phenolic and Coating Resins	$	76		$	126		$	291		$	433
Forest Products Resins	49			46			151			141
Corporate and Other	(10		)	(10		)	(36		)	(45		)
Reconciliation:
Items not included in Segment EBITDA:
Asset impairments and other non-cash charges	(5		)	(2		)	(53		)	(23		)
Business realignment costs	(11		)	(1		)	(29		)	(9		)
Integration costs	(2		)	(5		)	(8		)	(15		)
Net income from discontinued operations	—			—			—			2
Other	(2		)	(10		)	2			2
Total adjustments	(20		)	(18		)	(88		)	(43		)
Interest expense, net	(66		)	(67		)	(198		)	(196		)
Income tax benefit	373			5			371			2
Depreciation and amortization	(38		)	(43		)	(115		)	(127		)
Net income	$	364		$	39		$	376		$	165

Items Not Included in Segment EBITDA

Asset impairments and non-cash charges primarily represent asset impairments, stock-based compensation expense, accelerated depreciation recorded on closing facilities and unrealized derivative and foreign exchange gains and losses. Business realignment costs for the three and nine months ended September 30, 2012 primarily include expenses from the Company's restructuring and cost optimization programs. Business realignment costs for the three and nine months ended September 30, 2011 primarily relate to expenses from minor restructuring programs. Integration costs relate primarily to the Momentive Combination. Net income from discontinued operations represents the results of the IAR and CCR businesses.

Not included in Segment EBITDA are certain non-cash and other income and expenses. For the three months ended September 30, 2012, these items primarily include losses on the disposal of assets and other transaction costs, partially offset by net realized and unrealized foreign exchange transaction gains. For the nine months ended September 30, 2012, these items include net realized and unrealized foreign exchange transaction gains and insurance recoveries related to the terminated Huntsman merger, partially offset by losses on the disposal of assets. For the three and nine months ended September 30, 2011, these items primarily include business optimization expenses, retention program costs 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.