Guarantor Non-Guarantor Subsidiary Financial Information

3 Months Ended

Mar. 31, 2013

Guarantor Non Guarantor Subsidary Financial Information [Abstract]

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 6.625% First-Priority Senior Secured Notes due 2020, 8.875% Senior Secured Notes due 2018 and the 9.00% Second-Priority Senior Secured 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.

The Company revised its condensed consolidating statements of cash flows for the three months ended March 31, 2012 to correct the classification of intercompany dividends received. The revisions were made to appropriately classify dividends received that represent a return on investment as an operating activity. These amounts were previously classified as cash flows from investing activities. For the three months ended March 31, 2012, in the Momentive Specialty Chemicals Inc. column, the revisions resulted in an increase of $6 to “Cash flows provided by (used in) operating activities” with a corresponding offset to “Cash flows provided by (used in) investing activities.”

MOMENTIVE SPECIALTY CHEMICALS INC.

MARCH 31, 2013

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)	$	262		$	—	$	—		$	138		$	—		$	400
Short-term investments	—			—		—			6			—			6
Accounts receivable, net	195			—		—			418			—			613
Intercompany accounts receivable	104			67		—			400			(571		)	—
Intercompany loans receivable - current portion	239			—		—			357			(596		)	—
Inventories:
Finished and in-process goods	120			—		—			187			—			307
Raw materials and supplies	42			—		—			80			—			122
Other current assets	36			—		—			54			—			90
Total current assets	998			67		—			1,640			(1,167		)	1,538
Investment in unconsolidated entities	166			—		30			34			(176		)	54
Deferred income taxes	375			—		—			8			—			383
Other assets, net	34			63		3			35			—			135
Intercompany loans receivable	1,144			3,383		28			3,704			(8,259		)	—
Property and equipment, net	491			—		—			653			—			1,144
Goodwill	93			—		—			74			—			167
Other intangible assets, net	51			—		—			38			—			89
Total assets	$	3,352		$	3,513	$	61		$	6,186		$	(9,602	)	$	3,510
Liabilities and (Deficit) Equity
Current liabilities:
Accounts payable	$	175		$	—	$	—		$	328		$	—		$	503
Intercompany accounts payable	102			4		—			465			(571		)	—
Debt payable within one year	2			—		—			59			—			61
Intercompany loans payable within one year	199			—		—			397			(596		)	—
Interest payable	5			85		—			—			—			90
Income taxes payable	7			—		—			—			—			7
Accrued payroll and incentive compensation	17			—		—			31			—			48
Other current liabilities	67			—		—			57			—			124
Total current liabilities	574			89		—			1,337			(1,167		)	833
Long-term liabilities:
Long-term debt	329			3,327		—			71			—			3,727
Intercompany loans payable	3,414			—		7			4,838			(8,259		)	—
Accumulated losses of unconsolidated subsidiaries in excess of investment	355			—		87			—			(442		)	—
Long-term pension and post employment benefit obligations	96			—		—			208			—			304
Deferred income taxes	4			2		—			13			—			19
Other long-term liabilities	122			6		—			41			—			169
Total liabilities	4,894			3,424		94			6,508			(9,868		)	5,052
Total (deficit) equity	(1,542		)	89		(33		)	(322		)	266			(1,542		)
Total liabilities and (deficit) equity	$	3,352		$	3,513	$	61		$	6,186		$	(9,602	)	$	3,510

MOMENTIVE SPECIALTY CHEMICALS INC.

DECEMBER 31, 2012

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 $18, respectively)	$	276		$	—	$	—		$	143		$	—		$	419
Short-term investments	—			—		—			5			—			5
Accounts receivable, net	177			—		—			350			—			527
Intercompany accounts receivable	126			52		—			318			(496		)	—
Intercompany loans receivable - current portion	162			—		—			624			(786		)	—
Inventories:
Finished and in-process goods	109			—		—			153			—			262
Raw materials and supplies	35			—		—			70			—			105
Other current assets	38			—		—			43			—			81
Total current assets	923			52		—			1,706			(1,282		)	1,399
Investment in unconsolidated entities	252			—		42			18			(270		)	42
Deferred income taxes	337			—		—			11			—			348
Other assets, net	—			42		28			39			—			109
Intercompany loans receivable	773			2,273		27			3,835			(6,908		)	—
Property and equipment, net	493			—		—			674			—			1,167
Goodwill	93			—		—			76			—			169
Other intangible assets, net	53			—		—			38			—			91
Total assets	$	2,924		$	2,367	$	97		$	6,397		$	(8,460	)	$	3,325
Liabilities and (Deficit) Equity
Current liabilities:
Accounts payable	$	136		$	—	$	—		$	282		$	—		$	418
Intercompany accounts payable	96			4		1			395			(496		)	—
Debt payable within one year	13			—		—			63			—			76
Intercompany loans payable within one year	197			—		—			589			(786		)	—
Interest payable	12			51		—			—			—			63
Income taxes payable	3			—		—			1			—			4
Accrued payroll and incentive compensation	14			—		—			26			—			40
Other current liabilities	64			—		—			65			—			129
Total current liabilities	535			55		1			1,421			(1,282		)	730
Long term liabilities:
Long-term debt	860			2,138		—			421			—			3,419
Intercompany loans payable	2,303			4		7			4,594			(6,908		)	—
Accumulated losses of unconsolidated subsidiaries in excess of investment	325			—		107			—			(432		)	—
Long-term pension and post employment benefit obligations	98			—		—			211			—			309
Deferred income taxes	—			1		—			17			—			18
Other long-term liabilities	120			6		—			40			—			166
Total liabilities	4,241			2,204		115			6,704			(8,622		)	4,642
Total (deficit) equity	(1,317		)	163		(18		)	(307		)	162			(1,317		)
Total liabilities and (deficit) equity	$	2,924		$	2,367	$	97		$	6,397		$	(8,460	)	$	3,325

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED MARCH 31, 2013

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)



	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	537		$	—		$	—		$	708		$	(53	)	$	1,192
Cost of sales	464			—			—			638			(53		)	1,049
Gross profit	73			—			—			70			—			143
Selling, general and administrative expense	28			—			—			64			—			92
Business realignment costs	4			—			—			5			—			9
Other operating expense (income), net	4			(4		)	—			(3		)	—			(3		)
Operating income	37			4			—			4			—			45
Interest expense, net	10			61			—			3			—			74
Intercompany interest expense (income)	44			(63		)	—			19			—			—
Loss on extinguishment of debt	2			—			—			4			—			6
Other non-operating expense (income), net	15			—			—			(10		)	—			5
(Loss) income before income tax and (losses) earnings from unconsolidated entities	(34		)	6			—			(12		)	—			(40		)
Income tax (benefit) expense	(38		)	1			—			5			—			(32		)
Income (loss) before earnings from unconsolidated entities	4			5			—			(17		)	—			(8		)
(Losses) earnings from unconsolidated entities, net of taxes	(8		)	—			(6		)	1			17			4
Net (loss) income	$	(4	)	$	5		$	(6	)	$	(16	)	$	17		$	(4	)
Comprehensive (loss) income	$	(17	)	$	4		$	(7	)	$	(16	)	$	19		$	(17	)

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED MARCH 31, 2012

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS (Unaudited)



	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	538		$	—		$	—		$	769		$	(71	)	$	1,236
Cost of sales	458			—			—			677			(71		)	1,064
Gross profit	80			—			—			92			—			172
Selling, general and administrative expense	30			—			—			55			—			85
Asset impairments	—			—			—			23			—			23
Business realignment costs	2			—			—			13			—			15
Other operating expense, net	1			—			—			4			—			5
Operating income (loss)	47			—			—			(3		)	—			44
Interest expense, net	16			39			—			10			—			65
Intercompany interest expense (income)	30			(42		)	—			12			—			—
Other non-operating (income) expense, net	(11		)	—			(1		)	14			—			2
Income (loss) before income tax and earnings from unconsolidated entities	12			3			1			(39		)	—			(23		)
Income tax benefit	(1		)	—			—			(1		)	—			(2		)
Income (loss) before (losses) earnings from unconsolidated entities	13			3			1			(38		)	—			(21		)
(Losses) earnings from unconsolidated entities, net of taxes	(29		)	—			(2		)	—			36			5
Net (loss) income	$	(16	)	$	3		$	(1	)	$	(38	)	$	36		$	(16	)
Comprehensive income (loss)	$	13		$	4		$	(1	)	$	(21	)	$	18		$	13

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED MARCH 31, 2013

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)



	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows provided by (used in) operating activities	$	45		$	14		$	9		$	(16	)	$	(85	)	$	(33	)
Cash flows provided by (used in) investing activities
Capital expenditures	(14		)	—			—			(13		)	—			(27		)
Purchases of debt securities, net	—			—			—			(1		)	—			(1		)
Return of capital from subsidiary from sales of accounts receivable	31			—			—			—			(31		)	—
Change in restricted cash	—			—			—			15			—			15
Investment in unconsolidated affiliates, net	—			—			—			(14		)	—			(14		)
	17			—			—			(13		)	(31		)	(27		)
Cash flows (used in) provided by financing activities
Net short-term debt borrowings	—			—			—			1			—			1
Borrowings of long-term debt	—			1,108			—			17			—			1,125
Repayments of long-term debt	(543		)	(120		)	—			(371		)	—			(1,034		)
Net intercompany loan borrowings (repayments)	479			(903		)	(1		)	425			—			—
Long-term debt and credit facility financing fees	(12		)	(22		)	—			—			—			(34		)
Common stock dividends paid	—			(77		)	(8		)	—			85			—
Return of capital to parent from sales of accounts receivable	—			—			—			(31		)	31			—
	(76		)	(14		)	(9		)	41			116			58
Effect of exchange rates on cash and cash equivalents	—			—			—			(2		)	—			(2		)
(Decrease) increase in cash and cash equivalents	(14		)	—			—			10			—			(4		)
Cash and cash equivalents (unrestricted) at beginning of period	276			—			—			125			—			401
Cash and cash equivalents (unrestricted) at end of period	$	262		$	—		$	—		$	135		$	—		$	397

MOMENTIVE SPECIALTY CHEMICALS INC.

THREE MONTHS ENDED MARCH 31, 2012

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS (Unaudited)



	Momentive Specialty Chemicals Inc.			Subsidiary Issuers			Combined Subsidiary Guarantors			Combined Non-Guarantor Subsidiaries			Eliminations			Consolidated
Cash flows provided by (used in) operating activities	$	24		$	1		$	5		$	(6	)	$	(6	)	$	18
Cash flows provided by (used in) investing activities
Capital expenditures	(11		)	—			—			(19		)	—			(30		)
Proceeds from sale of debt securities, net	—			—			—			4			—			4
Funds remitted to unconsolidated affiliates	—			—			—			(2		)	—			(2		)
Return of capital from subsidiary from sales of accounts receivable	21			—			—			—			(21		)	—
	10			—			—			(17		)	(21		)	(28		)
Cash flows provided by (used in) financing activities
Net short-term debt repayments	—			—			—			(12		)	—			(12		)
Borrowings of long-term debt	—			450			—			—			—			450
Repayments of long-term debt	(269		)	—			—			(194		)	—			(463		)
Net intercompany loan borrowings (repayments)	268			(439		)	—			171			—			—
Long-term debt and credit facility financing fees	(1		)	(11		)	—			—			—			(12		)
Capital contribution from parent	16			—			—			—			—			16
Common stock dividends paid	(1		)	(1		)	(5		)	—			6			(1		)
Return of capital to parent from sales of accounts receivable	—			—			—			(21		)	21			—
	13			(1		)	(5		)	(56		)	27			(22		)
Effect of exchange rates on cash and cash equivalents	—			—			—			3			—			3
Increase (decrease) in cash and cash equivalents	47			—			—			(76		)	—			(29		)
Cash and cash equivalents (unrestricted) at beginning of period	212			—			—			204			—			416
Cash and cash equivalents (unrestricted) at end of period	$	259		$	—		$	—		$	128		$	—		$	387